aerospace and defense quarterly update · bolstered by sustained performance in the commercial...

Spring 2013

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Aerospace / Defense and Government Services MarketView

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(1) OUSD Comptroller / CFO, Fiscal Year 2014 Budget Request and FY2013 Update

(2) GFY13 Enacted and GFY14 Request exclude effects of sequestration . (3) DefenseNews, Hagel: ‘Everything on the Table’ 2


Spring 2013

Operational / Funding Environment With the deadline having come and gone for Congress to reach an agreement that would have avoided sequestration, the focus has now shifted to managing or even reversing the cuts effected by the Budget Control Act (“BCA”) of 2011. Congress had its first opportunity in late March with the Continuing Resolution (“CR”) that funded the Federal government through the end of the government fiscal year (“GFY”) to September 30

th. While failing to make significant

changes to sequestration, the CR did provide flexibility in administering the cuts, allowing for a reallocation of funds and start of new projects previously prohibited. This change was particularly important for the Department of Defense (“DoD”) as previously enacted allocation amounts were no longer aligned with current needs, causing operational deficiencies and underfunding of specific accounts such as operations and maintenance. An immediate benefit from the added flexibility was the DoD’s delay of roughly 800,000 furlough notices it had planned to issue civilian employees. Following the passing of the CR, attention has turned to the President’s $3.778 trillion spending plan for GFY14, which includes $527 billion for the DoD base budget and $88 billion for overseas contingency operations. Despite balanced deficit reduction measures that would allow Congress to replace and repeal the enacted BCA cuts, the proposed DoD topline for GFY14 is still subject to $52 billion in cuts if there is no change to the current law. With that said, the DoD proposal is designed to implement and align programs towards new strategic guidance, including (i) a smaller and leaner force; (ii) enhanced presence in the Asia / Pacific region while maintaining a stabilizing presence in the Middle East; (iii) prioritizing key counter-terrorism, cyber, and intelligence, reconnaissance, and surveillance capabilities; (iv) building innovative, global security partnerships; and (v) deterring aggression, particularly on the Korean peninsula.

Looking to GFY15 and beyond, Defense Secretary Chuck Hagel has ordered a Strategic Choices and Management Review in order to develop a framework for strategy, posture, and investments. Secretary Hagel has stated that the focus will be on three primary cost drivers: acquisition, personnel, and overhead. The rising costs associated with these areas have crowded out other portions of the budget over the past decade and if left unaddressed, will cause the U.S. to be without needed defense capabilities in the future. To put these costs in perspective, the Office of the Secretary of Defense, Joint Chiefs of Staff, defense agencies, and combatant commands account for more than 240,000 people who consume ~$113 billion of the DoD budget annually. Additionally, if current DoD personnel costs grow at 2.6% (~2% below the current average) over the next decade, they will consume ~46% of the DoD budget by the year 2021. While these items are key to Secretary Hagel’s reform agenda, they will not be addressed until the 2015 budget proposal.

(3)

On domestic spending, there are two clear focus areas in the President’s GFY14 budget—deficit / debt reduction and health. The budget includes $1.8 trillion of additional deficit reduction over 10 years and calls for $400 billion in health savings that crack down on fraud and waste to strengthen Medicare. Additionally, $1.3 billion is proposed for development of the Military Health System (“MHS”) and $136 million for Veteran Affairs (“VA”) to implement its paperless claim system and improve claim processing. The VA has been insulated from sequestration and broader budget cuts not only because of the political sensitivity of its mission, but also because of the increasing demands placed on the agency, which have led to a large backlog of benefit claims for Veterans. The VA is increasingly turning to IT solutions to help remedy the situation, as evidenced by the 19.1% increase in the VA’s IT budget. Within the MHS, $143 million is directly slated for IT development. The somewhat stabilized fiscal environment is also beginning to allow contractors to look ahead for business opportunities. For example, the D/SIDDOMS III contracts (worth $2.4 billion over the last few years) are set to expire in 2013. MHS has stated follow-on contracts will not be put in place, so large and small contractors alike should prepare for replacement IT and concept development contracts to be freshly procured. In the current environment, where any budget growth should be viewed as an opportunity and total diversified Federal IT budgets provide only modest growth, we continue to see strong interest from buyers for businesses that are well-positioned in health IT and the VA.

2014 DoD Base Budget by Component(1)

2014 DoD Base Budget by Department(1)

Shifts in DoD Base Budget Request(1)(2)

($ in billions)

O&M40%

Personnel26%

RDT&E13%

Other2%

Navy30%

Air Force27%

Army25%

Defense-Wide18%

By Component

GFY13

Enacted

GFY14

Request %∆

O&M $210.1 $209.4 (0.3%)

Military Personnel 135.4 137.1 1.3%

Procurement 99.8 99.3 (0.5%)

RDT&E 69.4 67.5 (2.7%)

Other 12.8 13.3 3.9%

Total $527.5 $526.6 1.6%

By Department

GFY13

Enacted

GFY14

Request %∆

Navy $158.9 $155.8 (2.0%)

Air Force 139.8 144.4 3.3%

Army 131.9 129.7 (1.7%)

Defense-Wide 96.9 96.7 (0.2%)

Total $527.5 $526.6 (0.2%)

Procurement 19%

(1) Capital IQ, company filings, and KippsDeSanto research 3


Spring 2013

Capital Markets and Public Market Valuation Trends

Aerospace and defense shares have benefited from the passage of the CR in March, which gave contractors long-awaited visibility into the DoD’s spending throughout the rest of GFY13. The enactment of sequestration, while potentially detrimental to certain contractors, did serve to further lift the uncertainty that shrouded the market throughout the first quarter of the year. Though relatively flat in the year-to-date period, aerospace shares have performed well, returning 14.0% over the last year, with aerospace suppliers benefiting from record backlogs and increased production rates at the major OEMs. As noted on page six, production rates at Airbus and Boeing have been increasing on many platforms, driving demand for components and subsystems from suppliers. B/E Aerospace, up 24.5% over the last year, and TransDigm, up 27.2% over the last year, have both cited increased build rates as drivers for their performance, particularly on widebody aircraft. However, if build rates begin to stabilize in the medium- to longer-term, OEM suppliers such as B/E Aerospace and TransDigm may see more moderate revenue growth. Aerospace aftermarket suppliers are facing a mixed outlook, with 2013 growth forecasted to be in low single digits. Growth in aftermarket avionics and mechanical components is expected to be in line with increases in airline traffic, while engine component suppliers expect modest growth in 2013, following 2012 declines such as those at United Technologies, whose Pratt & Whitney unit reported a 12.0% drop in spares orders from 2011. Aftermarket engine suppliers are susceptible to an increasing number of aircraft retirements, supported by airlines’ shift to more fuel-efficient aircraft and a low interest rate environment that facilitates new aircraft purchases. The retirements lead to a surplus of used engine parts available for maintenance shops, while the deployment of newer aircraft reduces the immediate demand for engine overhauls and spare parts. After a period of underperformance on account of budgetary uncertainty, defense shares have recently rebounded as the CR and enactment of sequestration provided some visibility in the short-term. As of May 1

st, defense primes had

returned 13.8% since sequestration went into effect on March 1st, outperforming the S&P 500’s return of 4.2%.

Nevertheless, companies with exposure to DoD spending continue to feel pressure, especially since the cuts were not avoided. For instance, AeroVironment, down 30.7% year-to-date, cited government order delays as the largest issue impacting its first quarter earnings decline that led to it missing analyst expectations.

For the first quarter of FY13, much of the budget uncertainty and sequestration fears facing government services providers seems to be priced into the public markets (our Government Services index has returned 11.6% over the last three months, compared to 4.2% for the S&P 500). Companies are using the economic trough as an opportunity to evaluate their current positioning, and actively re-adjust strategies for the future. Despite disappointing 3Q13 earnings (missed revenue and EPS estimates by $32.8 million and $0.03, respectively), CACI stock saw minimal change. In an effort to improve future performance; however, CACI’s new CEO continues to focus more aggressively on contract wins, though there is concern that such a strategy could lead to pricing and margin pressure. Similarly, SAIC reported 4Q13 EPS of $0.54, 5.9% ahead of the Street, but FY14 revenue guidance (including sequester) of $10.0 – $10.7 billion was below estimates of $10.8 billion. Although analysts remain skeptical, SAIC’s split is projected to produce more savings than previously expected. On the other hand, with the threat of cyber-attacks becoming increasingly visible in the market, KEYW continues to be viewed as a strong cyber play. As one of the purer-plays for government cyber services and products, the Company is expected to benefit from expanding cybersecurity budgets that are less likely to be affected long-term by impending funding declines, as well as its move to expand into commercial markets via the Company’s Project G. KEYW has already set targets for 2015, with revenue exceeding $500 million and EBITDA margins between 17 – 19% (assuming Project G can generate revenue of $75 million with gross margins of 75%).

Relative Stock Price Performance(1)

12 Months Ended May 1, 2013

Relative Stock Price Performance Post-Sequestration(1)

March 1, 2013 – May 1, 2013

75

80

85

90

95

100

105

110

115

120

125

May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13

Defense Primes Aerospace Government Services S&P 500

95

97

99

101

103

105

107

109

111

113

115

1-Mar 8-Mar 15-Mar 22-Mar 29-Mar 5-Apr 12-Apr 19-Apr 26-Apr

Defense Primes Aerospace Government Services S&P 500

17.3%

14.9%

12.6%

14.0%

11.6%

13.8%

4.2%

3.7%



Spring 2013

M&A Trends and Activity While M&A volume was relatively flat overall in the first quarter of 2013, with 56 aerospace, defense, and government services transactions, compared with 58 transactions in the same period last year, the mix changed materially. The aerospace sector continued to see growing M&A activity, with 27 transactions in 1Q13 versus 20 in 1Q12. The sector is bolstered by sustained performance in the commercial aircraft market, with OEMs handling record backlogs, fueling demand for components, subsystems, and structures. Defense transactions continued to remain flat in the wake of sequestration, numbering 16 in 1Q13 compared with 14 transactions in 1Q12.

There has been increased private equity involvement in the aerospace and defense sectors, with 48% of deals in 1Q13 having financial sponsor involvement. Aerospace components, subsystems, composites, and aerostructures represented over 65% of private equity acquisitions in the space, as sponsors sought to capitalize on the positive trends in the commercial aerospace market. Notably, in March, Greenbriar Equity Group announced that it had agreed to acquire Edac Technologies Corporation, a producer of fixtures, molds, and jet engine components, for $17.75 a share, implying an EV / EBITDA multiple of 10.3x. MidOcean Partners countered Greenbriar’s bid for the component manufacturer with an offer of $18.25 a share, though that offer was subsequently withdrawn.

MRO and aerospace service transactions continue to be well-represented, with eight such transactions in 1Q13, compared with nine in 1Q12. While many of these deals have been smaller in size and focused on expanding the buyer’s geographic footprint of repair stations, a number of acquisitions have demonstrated a shift by OEMs to include maintenance and support services as part of their portfolios. For instance, Lockheed Martin acquired MRO assets from Aveos Fleet Performance, expanding its service capabilities in CF34 and CFM56 engines. Textron, through its Cessna subsidiary, acquired the Dusseldorf and Zurich MRO operations of Jet Aviation Management, expanding its presence in Europe and bolstering its support service offerings for Cessna aircraft. The heavy rush to market witnessed in 2012—driven by sequestration worries and increasing tax implications—brought 107 announced government services transactions by year end, significantly above the five year average annual deal count of 93 transactions. As expected, in the wake of the increased 2012 activity, only 15 transactions have been announced year-to-date, compared to 34 during the same period last year. However, deal activity is anticipated to increase during the remainder of 2013 as the budget picture becomes more clear and buyers continue to reposition into growing markets, refocus on core services, and reshape their portfolios in an effort to unlock additional value. Divestitures, from both large and small companies, are expected to continue to be a key driver of M&A activity during 2013, fueled by ongoing leadership changes among government services and defense companies and the persistent challenge to deliver organic growth. 2013 has already seen six divestitures (Salient Federal Solutions / Fannie Mae Division; LexisNexis Risk Solutions / Employment and Resident Screening Business Unit; OGSystems / TASER Business Unit; Luna Innovations / Secure Computing and Communications Group; System Planning Corporation / GlobalTrak Division; and Viecore / Federal Systems Division). Other notable deals this year include ManTech’s acquisition of ALTA Systems, expanding its offerings in the healthcare market; Parsons’ acquisition of First Support Services, aimed at enhancing operations and maintenance offerings; and TrueNorth Logistics acquisition of RAMTECH Support Services, which will allow TrueNorth to pursue additional opportunities in defense depots and military base operations.

M&A Transaction Volume(1)

e

1924

1116

21 2518

2721 17 16 18 14

2617 21

16

1415

1311

1512 22

18

1515

2932

20

37

2023

27

9

20

2226

2517

3126

18 28

2222

24

24

24

35

1342

59

46

53

61

54

71 71

54

60

6772

58

87

61

79

56

0

10

20

30

40

50

60

70

80

90

100

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

Defense Aerospace Government Services

2009200 deals announced

2010257 deals announced 2011

253 deals announced

2012285 deals announced

(1) Capital IQ, company filings, and KippsDeSanto research

(2) Council on Foreign Relations 5


Spring 2013

Defense Update

Defense Earnings Update(1)

In first quarter earnings calls, General Dynamics, Northrop Grumman, Raytheon, and Lockheed Martin all provided full-year guidance which incorporates assessments of sequestration effects. L-3 did not provide 2013 guidance incorporating impacts from sequestration, however did note that the cuts could reduce 2013 guidance by up to $500 million for net sales and $0.65 for diluted EPS. Generally, defense contractors expect top-line revenue to decline for the year, however strong margins are expected to offset these effects in several cases, driving higher earnings guidance for the year. For instance, Raytheon forecasts a ~1.7% decline in revenue for 2013, however due to strong margins in 1Q13, has raised its full-year EPS guidance by ~2.0%.

2014 Presidential Budget Highlights by Select Program

Though the Presidential 2014 budget request may be nothing more than a “political document,” the proposal provides an indication of programmatic priorities that may ultimately carry-over into the final budget. Specific programs mentioned in the request reemphasize the strategic interests of the administration while others demonstrate cost-saving initiatives. For instance, the proposal includes $8.4 billion to continue the F-35 Joint Stike Fighter program, a program thought to be in danger due to sequestration effects. Some cost efficiencies are mentioned outright, such as the plan to terminate further procurement of Block 30 Global Hawks resulting in savings of roughly $324 million. Other savings are buried amongst “modernization” efforts. For instance the DoD will modify avionics systems in old C-130 Hercules transport planes instead of sticking with its original plan of procuring new airlifters such as the C-27.

North Korean Potential Missile Ranges(2)

Estimated Ranges

Tensions on the Korean peninsula have continued to escalate after North Korea made aggressive statements regarding attacks on U.S. bases in the Pacific. North Korea is believed to have more than 1,000 missiles of varying capabilities, including long-range missiles which could, over time, advance enough to strike U.S. territory. Recently, an unclassified DIA assessment mentioned that, with “moderate confidence,” the agency believes North Korea has nuclear weapons capable of delivery by ballistic missiles, but the reliability of those weapons is very low. Meanwhile, some political leaders such as former Prime Minister of Australia Kevin Rudd argue that we are in danger of overanalyzing the situation and we instead need to focus attention on keeping positive relationships with China. In the meantime, President Obama continues to budget for strategic priorities and a “renewed commitment” to the nation’s historical role in the Asia-Pacific region, including revitalizing Guam’s position as a strategic hub. However, North Korea is likely years away from developing long-range nuclear missile capabilities.

EPS (Latest Quarter Releases) Qtr. EPS

Defense Estimated Actual Release Date Prior Year

$1.50 $1.62 24-Apr-2013 $1.57

1.93 2.11 25-Apr-2013 2.01

2.04 2.33 23-Apr-2013 2.03

1.71 2.03 24-Apr-2013 1.96

1.28 1.49 25-Apr-2013 1.32

0.97 1.07 24-Apr-2013 0.96

PROGRAMPRESIDENTIAL

BUDGET FAVORSELECT FIRMS IMPACTED

F-35

C-130

Global Hawk

Block 30

Budget

Priority

Program

Cancellations

Modernization /

Cost Savings

North Korea

China

Russia

Iran

Alaska,

U.S.

Canada

Guam

1 2 3 4

1

2

3

4

Nodong – 1,000km

Operational

Missile – Range

Taepodong 1 – 2,200km

Musudan – 4,000km

Taepodong 2 – 6,000km

1Q13 DEFENSE EARNINGS: PLANNING FOR SEQUESTRATION

PRESIDENTIAL PROGRAMS: PRIORITIES AND

LOSERS IN THE 2014 BUDGET REQUEST

NORTH KOREA: FAR FROM HOME AND FAR FROM CAPABLE



Spring 2013

Aerospace Update

Aerospace Earnings Update(1)

Generally, the aerospace sector reported earnings at or above consensus estimates. Boeing’s first quarter core EPS increased 24% over 1Q12 EPS to $1.73 driven by solid performance across business units, notably, strong backlog in the Commercial Airplanes division and increased operating margins in the Defense, Space & Security division. B/E Aerospace CEO Amin Khoury mentioned that revenue growth continues to be driven primarily by the robust new aircraft delivery cycle, increasing 1Q13 EPS by 29.9% over the same period last year. United Technologies beat consensus estimates after including $0.11 of net benefit for restructuring and one-time adjustments. Furthermore, the integration of Goodrich and IAE provided $0.21 of EPS.

Boeing and Airbus Monthly Production Rates(1)

For Years Ended and Ending 2011 – 2014P

(in number of aircraft per month)

Headlines from Boeing and Airbus have noted that strong demand for commercial airplanes and healthy backlog are driving increased production rates. Both companies have determined the need to increase production rates as airlines continue to replace older, less fuel-efficient airplanes and global passenger traffic grows faster than capacity. Certainly Boeing’s 777 will face pressure from the entry of Airbus’ A350, which will likely influence decisions to increase rates further. Boeing specifically noted that a third production line is in development at the company’s Renton plant, which should allow for an increased 737 production rate of 42 per month by 2014 and even higher thereafter. Meanwhile, Airbus has decided to maintain the A320 production rate at 42 per month instead of the previously planned 44, noting the difficulty in stabilizing the supply chain as suppliers are unable to increase production. Given these supply chain constraints, it is unclear whether there is much room to increase production rates further, implying that OEM growth could be slowing down in the intermediate term.

Total Mainline and Regional Fleet(1)

As of December 31, 2012

In February of this year, American Airlines and US Airways announced intentions to merge and form a single airline. More recently, a U.S. Bankruptcy Judge approved the merger, however declined to authorize a proposed severance package for Thomas Horton, CEO of American Airlines’ parent company AMR Corporation, worth nearly $20 million. The merger still needs approval from creditors and antitrust regulators. The combined company would have the world’s largest mainline and regional fleet, made up of US Airways’ 622 and American’s 889 aircraft. Together, the companies have 271 Boeing and 336 Airbus aircraft on order, which both companies affirmed they will uphold post-merger. Moreover, American Airlines has an option for an additional 523 aircraft. The all-stock potential merger is valued at roughly $11 billion and the companies are targeting a consummated transaction by October 14

th of this year.

31.5

3538

42

3840

42 42

7 7 8.3 8.38 9 10 11

0

5

10

15

20

25

30

35

40

45

2011 2012 2013E 2014P

Boeing 737 Airbus A320 Boeing 777 Airbus A330

SOUTHWEST 692

UNITED 1,239

DELTA 1,289

AMERICAN / US AIRWAYS 1,511

US AIRWAYS 622 AMERICAN 889

1Q13 AEROSPACE EARNINGS MAINTAIN ALTITUDE

COMMERCIAL AIRLINE PRODUCTION RATES

INCREASE TO MEET DEMAND

US AIRWAYS / AMERICAN AIRLINES POTENTIAL MERGER


Aerospace Estimated Actual Release Date Prior Year

$0.80 $0.87 22-Apr-2013 $0.67

1.47 1.73 24-Apr-2013 1.22

0.42 0.43 22-Apr-2013 0.39

0.82 0.80 26-Apr-2013 0.77

1.17 1.17 19-Apr-2013 1.09

1.30 1.39 23-Apr-2013 1.31

(1) Capital IQ, company filings, and KippsDeSanto research

(2) “Federal Information Technology: FY 2013 Budget Priorities,” Steven VanRoekel, U.S. Chief Information Officer . (3) Bloomberg, IDC Research, PWC Money Tree, and CB Insights 7


Spring 2013

Government Services Update

YTD Government Services Performance Review(1)

Much of the pessimism surrounding sequestration has already been priced into the markets, with many government services companies reporting earnings in the first quarter of the calendar year that were either in line with or close to consensus estimates. Up to this point, the effect of sequestration has varied across the sector. NCI made a strong cost-cutting drive last year and said it was relatively unscathed by sequestration. The company reported a 16.1% year-over-year increase in operating income despite a 7.6% year-over-year decrease in revenue. On the other hand, CACI reported a significant impact from sequestration cuts, reporting a second straight quarter of disappointing results with operating income down 5.7% year-over-year.

Projected 2014 IT Budgets for Select Agencies

(2)

($ in millions)

The Federal IT budget has been relatively insulated from government budget cuts. The 2014 budget calls for $82 billion in Federal IT spending, a 1.8% increase over 2013 CR funding levels. While this continues a slowdown in Federal IT spending growth in recent years (Federal IT spending grew at a CAGR of 7.1% from 2001 to 2009, but has only grown at a CAGR of 0.8% since 2009), this slow growth rate does not necessarily mean that there are fewer opportunities for contractors. Instead, Federal IT spending is shifting within the government, with a greater focus on cost savings, healthcare, and cybersecurity applications. In the 2014 budget, IT spending for the VA and Department of Homeland Security is expected to increase 19.1% and 7.0%, respectively, while the Department of Agriculture, Department of Interior, and Department of Justice are all expected to experience slight decreases in their IT budgets.

Big Data VC Funding

For the Years 2010 and 2012

Big Data has seen a surge in venture capital (“VC”) activity over the past two years, increasing from ~$0.7 billion of investment in 2010 to $1.4 billion in 2012, as Big Data technologies are increasingly used to develop competitive advantages and situational awareness. The proportion of total VC funding devoted to Big Data also experienced a significant uptick, increasing from 2.9% in 2010 to 5.3% in 2012. Even as the Big Data market becomes more crowded, home run investment potential continues to draw new investors, with the most recent attraction being the speculation of a buyout of Splunk. Some estimates value a potential Splunk transaction at ~25x revenue, that would make it one of the priciest software deals of the last five years, as the company benefits from first-mover status in a Big Data market expected to grow at a 32% CAGR between 2012 and 2016.


Estimated Actual Earnings Release Prior Year

$0.38 $0.41 30-Jan-2013 $0.40

1.65 1.62 1-May-2013 1.45

0.14 0.12 1-May-2013 0.17

0.55 0.77 12-Mar-2013 NA

0.46 0.51 3-May-2013 0.45

(0.03) (0.06) 30-Apr-2013 0.01

0.58 0.54 1-May-2013 0.69

0.08 0.15 1-May-2013 0.12

0.51 0.54 26-Mar-2013 (0.49)

$2,510

$2,657

$3,128

$3,890

$3,746

$6,072

$7,288

$2,526

$2,687

$3,146

$3,267

$3,706

$5,674

$7,416

$2,000 $4,000 $6,000 $8,000

USDA

Justice

DoT

VA

Treasury

DHS

HHS

GFY13 GFY14

7.0%

Growth (1.7%)

1.1%

19.1%

(0.6%)

(1.1%)

(0.6%)

Other VC Funding

2.9%

Big Data VC Funding

Other VC Funding

5.3%

Big Data VC Funding

Total VC Funding:

$23.3 billion

Total VC Funding:

$26.5 billion

2010 2012

GOVERNMENT SERVICES PROVIDERS STABILIZE IN

FACE OF SEQUESTRATION CUTS

IT BUDGETS EXPECTED TO SHIFT ACROSS

FEDERAL AGENCIES

BIG DATA TAKES A BIGGER SLICE OF VC PIE(3)

(1) Company filings, Capital IQ, and KippsDeSanto research 8


Spring 2013

Public Company Trading Analysis(1) ($ in millions, except per share amounts)

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014P

Defense Primes 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

The Boeing Company $93.74 99.8% $71,118.8 $68,580.8 $84,206.7 $8,178.2 9.7% $92,054.5 $9,206.2 10.0% 0.81x 8.4x 0.75x 7.4x

Lockheed Martin Corporation 102.01 99.9% 32,500.9 35,739.9 45,231.3 5,344.3 11.8% 44,412.4 5,402.1 12.2% 0.79x 6.7x 0.80x 6.6x

General Dynamics Corp. 75.24 99.8% 26,573.8 26,737.8 31,658.3 4,164.1 13.2% 31,594.1 4,279.4 13.5% 0.84x 6.4x 0.85x 6.2x

Raytheon Co. 63.04 99.7% 20,463.7 21,352.7 23,853.2 3,165.3 13.3% 23,422.8 3,180.9 13.6% 0.90x 6.7x 0.91x 6.7x

BAE Systems plc 5.84 93.8% 18,896.0 18,384.0 28,678.0 3,611.5 12.6% 28,710.6 3,551.2 12.4% 0.64x 5.1x 0.64x 5.2x

Northrop Grumman Corporation 76.84 99.8% 18,070.4 18,829.4 24,024.8 3,201.7 13.3% 23,411.3 3,153.7 13.5% 0.78x 5.9x 0.80x 6.0x

Median 99.8% $23,518.7 $24,045.2 $30,168.2 $3,887.8 12.9% $30,152.4 $3,915.3 12.9% 0.80x 6.6x 0.80x 6.4x

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014PDefense Systems 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

Rockwell Collins Inc. $64.41 99.9% $8,738.6 $9,561.6 $4,685.4 $1,111.6 23.7% $4,860.2 $1,151.8 23.7% 2.04x 8.6x 1.97x 8.3x

L-3 Communications Holdings Inc. 83.42 99.3% 7,524.8 10,952.8 12,572.0 1,494.4 11.9% 12,289.3 1,459.0 11.9% 0.87x 7.3x 0.89x 7.5x

Cobham plc 3.97 97.1% 4,278.0 4,864.0 2,639.3 587.2 22.2% 2,663.7 606.1 22.8% 1.84x 8.3x 1.83x 8.0x

FLIR Systems, Inc. 24.45 90.0% 3,536.6 3,539.0 1,524.3 394.4 25.9% 1,597.5 423.6 26.5% 2.32x 9.0x 2.22x 8.4x

Huntington Ingalls Industries, Inc. 53.34 98.4% 2,646.8 3,419.8 6,649.9 597.3 9.0% 6,614.9 665.4 10.1% 0.51x 5.7x 0.52x 5.1x

Alliant Techsystems Inc. 72.97 97.3% 2,358.2 3,025.2 4,219.5 541.4 12.8% 4,126.7 497.1 12.0% 0.72x 5.6x 0.73x 6.1x

Kongsberg Gruppen ASA 19.33 82.7% 2,311.9 2,101.2 2,960.7 402.0 13.6% 3,210.4 438.5 13.7% 0.71x 5.2x 0.65x 4.8x

Exelis, Inc. 11.25 91.3% 2,116.5 2,580.5 5,028.7 593.2 11.8% 4,970.2 640.0 12.9% 0.51x 4.4x 0.52x 4.0x

Cubic Corporation 45.59 86.8% 1,218.9 1,148.4 1,358.3 123.1 9.1% 1,376.0 135.0 9.8% 0.85x 9.3x 0.83x 8.5x

AeroVironment, Inc. 19.88 71.5% 435.7 301.9 361.0 57.7 16.0% 357.2 59.1 16.5% 0.84x 5.2x 0.85x 5.1x

Median 94.2% $2,502.5 $3,222.5 $3,590.1 $564.3 13.2% $3,668.6 $551.6 13.3% 0.84x 6.5x 0.84x 6.8x

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014PDefense Electronics / Comm. 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

Harris Corporation $46.47 89.0% $5,092.3 $6,558.3 $5,303.1 $1,184.5 22.3% $5,269.9 $1,163.7 22.1% 1.24x 5.5x 1.24x 5.6x

Teledyne Technologies Inc. 76.34 96.8% 2,848.6 3,498.3 2,295.7 339.8 14.8% 2,420.9 380.4 15.7% 1.52x 10.3x 1.45x 9.2x

ViaSat Inc. 49.39 96.5% 2,217.9 2,696.0 1,179.9 220.4 18.7% 1,387.9 332.2 23.9% 2.28x 12.2x 1.94x 8.1x

Ultra Electronics Holdings plc 26.21 96.2% 1,816.0 1,883.0 1,189.9 216.3 18.2% 1,219.5 215.3 17.7% 1.58x 8.7x 1.54x 8.7x

Orbital Sciences Corp. 18.15 98.5% 1,088.8 1,038.3 1,484.1 151.4 10.2% 1,572.8 166.9 10.6% 0.70x 6.9x 0.66x 6.2x

Comtech Telecommunications Corp. 25.20 81.2% 423.9 271.0 369.0 70.5 19.1% 364.1 61.9 17.0% 0.73x 3.8x 0.74x 4.4x

Mercury Systems, Inc. 9.23 69.0% 298.0 262.9 230.5 15.7 6.8% 215.0 28.1 13.1% 1.14x 16.7x 1.22x 9.4x

Median 96.2% $1,816.0 $1,883.0 $1,189.9 $216.3 18.2% $1,387.9 $215.3 17.0% 1.24x 8.7x 1.24x 8.1x

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014PHomeland Security 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

Smiths Group plc $19.54 93.5% $7,691.1 $9,057.1 $4,818.5 $1,024.5 21.3% $5,032.3 $1,083.2 21.5% 1.88x 8.8x 1.80x 8.4x

Mine Safety Appliances Co. 48.96 95.9% 1,818.5 2,038.6 1,223.8 189.1 15.5% 1,309.0 222.8 17.0% 1.67x 10.8x 1.56x 9.1x

OSI Systems, Inc. 57.86 71.2% 1,160.3 1,180.5 906.0 165.9 18.3% NA NA NA 1.30x 7.1x NA NA

Analogic Corporation 78.16 92.3% 956.8 781.6 602.9 93.8 15.6% NA NA NA 1.30x 8.3x NA NA

Smith & Wesson Holding Corporation 8.74 77.7% 560.8 548.6 565.9 130.2 23.0% NA NA NA 0.97x 4.2x NA NA

Federal Signal Corp. 8.07 93.5% 503.6 631.7 817.2 72.6 8.9% 832.0 NA NA 0.77x 8.7x 0.76x NA

Airboss of America Corp. 4.91 95.9% 110.7 118.8 253.6 19.6 7.7% 262.6 21.2 8.1% 0.47x 6.1x 0.45x 5.6x

Median 93.5% $956.8 $781.6 $817.2 $130.2 15.6% $1,070.5 $222.8 17.0% 1.30x 8.3x 1.16x 8.4x



Spring 2013

Public Company Trading Analysis, cont.(1) ($ in millions, except per share amounts)

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014P

Aerospace Systems 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

TransDigm Group Incorporated $149.50 96.3% $7,481.0 $11,255.5 $1,913.5 $894.6 46.8% $2,060.1 $975.6 47.4% 5.88x 12.6x 5.46x 11.5x

Zodiac Aerospace 126.44 99.3% 6,839.5 8,231.0 5,083.2 851.9 16.8% 5,427.2 923.1 17.0% 1.62x 9.7x 1.52x 8.9x

B/E Aerospace Inc. 63.64 98.6% 6,665.1 8,310.9 3,382.7 707.4 20.9% 3,778.7 831.1 22.0% 2.46x 11.7x 2.20x 10.0x

Meggitt PLC 7.54 97.5% 5,931.8 6,976.4 2,545.6 758.3 29.8% 2,692.6 810.4 30.1% 2.74x 9.2x 2.59x 8.6x

Triumph Group, Inc. 71.39 87.3% 3,578.3 4,876.1 3,870.9 710.8 18.4% 4,166.0 805.4 19.3% 1.26x 6.9x 1.17x 6.1x

Esterline Technologies Corp. 75.14 96.5% 2,328.5 2,950.2 2,089.1 390.6 18.7% 2,198.9 406.5 18.5% 1.41x 7.6x 1.34x 7.3x

HEICO Corporation 43.79 91.9% 2,057.1 2,450.0 984.0 217.8 22.1% 1,074.2 242.0 22.5% 2.49x 11.3x 2.28x 10.1x

AAR Corp. 18.57 90.9% 718.6 1,333.6 2,109.1 228.6 10.8% 2,264.2 250.0 11.0% 0.63x 5.8x 0.59x 5.3x

Astronics Corporation 28.78 89.8% 415.0 437.8 299.6 49.3 16.5% 329.6 58.4 17.7% 1.46x 8.9x 1.33x 7.5x

Median 96.3% $3,578.3 $4,876.1 $2,109.1 $707.4 18.7% $2,264.2 $805.4 19.3% 1.62x 9.2x 1.52x 8.6x

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014PAerospace Structures 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

Precision Castparts Corp. $189.90 96.9% $27,811.4 $31,544.8 $10,157.2 $2,845.8 28.0% $11,208.6 $3,253.7 29.0% 3.11x 11.1x 2.81x 9.7x

Hexcel Corp. 31.25 99.0% 3,132.9 3,388.5 1,694.4 340.0 20.1% 1,847.0 377.5 20.4% 2.00x 10.0x 1.83x 9.0x

Spirit AeroSystems Holdings, Inc. 20.50 79.2% 2,891.2 3,753.3 5,984.5 676.1 11.3% 6,595.9 765.1 11.6% 0.63x 5.6x 0.57x 4.9x

Senior plc 3.96 98.6% 1,641.0 1,756.3 1,187.9 190.6 16.0% 1,263.8 204.7 16.2% 1.48x 9.2x 1.39x 8.6x

LMI Aerospace Inc. 20.89 90.0% 262.6 518.9 479.5 75.6 15.8% 526.5 85.2 16.2% 1.08x 6.9x 0.99x 6.1x

Median 96.9% $2,891.2 $3,388.5 $1,694.4 $340.0 16.0% $1,847.0 $377.5 16.2% 1.48x 9.2x 1.39x 8.6x

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014PGovernment Services 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

SAIC, Inc. $14.91 99.5% $5,100.9 $5,662.9 $10,831.2 $883.8 8.2% $10,522.1 $843.8 8.0% 0.52x 6.4x 0.54x 6.7x

Booz Allen Hamilton 15.47 80.4% 2,140.0 3,548.8 5,776.3 508.8 8.8% 5,727.3 497.1 8.7% 0.61x 7.0x 0.62x 7.1x

QinetiQ Group Plc 2.97 89.0% 1,926.9 1,900.1 2,029.2 263.4 13.0% 2,024.1 254.2 12.6% 0.94x 7.2x 0.94x 7.5x

CACI International Inc. 61.26 99.1% 1,409.7 2,037.9 3,720.4 332.7 8.9% 3,706.1 326.9 8.8% 0.55x 6.1x 0.55x 6.2x

ManTech International Corporation 28.11 99.5% 1,042.4 1,070.1 2,532.2 190.2 7.5% 2,417.2 183.7 7.6% 0.42x 5.6x 0.44x 5.8x

ICF International Inc. 27.27 98.0% 537.7 620.0 946.5 94.1 9.9% 989.1 98.0 9.9% 0.66x 6.6x 0.63x 6.3x

The KEYW Holding Corporation 13.60 82.7% 497.7 591.0 347.5 46.5 13.4% 396.3 57.3 14.5% 1.70x 12.7x 1.49x 10.3x

Engility Holdings, Inc. 24.39 97.2% 418.1 739.1 1,468.2 119.6 8.1% 1,422.1 100.9 7.1% 0.50x 6.2x 0.52x 7.3x

Kratos Defense & Security Solutions 5.26 85.0% 298.0 899.6 1,018.6 124.0 12.2% 1,058.2 138.9 13.1% 0.88x 7.3x 0.85x 6.5x

NCI, Inc. 4.64 58.0% 60.0 85.1 305.9 15.7 5.1% 307.3 13.7 4.5% 0.28x 5.4x 0.28x 6.2x

Dynamics Research Corporation 5.59 76.6% 57.9 154.5 290.7 26.1 9.0% 284.8 24.2 8.5% 0.53x 5.9x 0.54x 6.4x

Median 89.0% $537.7 $899.6 $1,468.2 $124.0 8.9% $1,422.1 $138.9 8.7% 0.55x 6.4x 0.55x 6.5x

Stock Price % of 52 Market Enterprise CY 2013E CY 2014P EV / CY 2013E EV / CY 2014PEngineering & Construction 05/03/13 Week High Cap Value Rev. EBITDA Margin Rev. EBITDA Margin Rev. EBITDA Rev. EBITDA

Jacobs Engineering Group Inc. $50.63 89.6% $6,622.3 $5,946.7 $12,212.2 $799.8 6.5% $12,906.5 $848.5 6.6% 0.49x 7.4x 0.46x 7.0x

Babcock International Group plc 16.69 96.3% 6,037.3 7,046.3 5,145.0 609.1 11.8% 5,508.1 651.7 11.8% 1.37x 11.6x 1.28x 10.8x

URS Corporation 45.54 95.9% 3,461.9 5,353.6 11,951.5 946.9 7.9% 12,519.0 980.8 7.8% 0.45x 5.7x 0.43x 5.5x

AECOM Technology Corporation 29.84 90.2% 3,125.7 3,828.3 8,524.3 538.1 6.3% 9,034.6 682.9 7.6% 0.45x 7.1x 0.42x 5.6x

Tetra Tech Inc. 26.85 85.3% 1,743.3 1,742.4 2,313.1 264.5 11.4% 2,323.1 254.0 10.9% 0.75x 6.6x 0.75x 6.9x

Median 90.2% $3,461.9 $5,353.6 $8,524.3 $609.1 7.9% $9,034.6 $682.9 7.8% 0.49x 7.1x 0.46x 6.9x



Spring 2013

Select Recent Aerospace / Defense M&A(1) ($ in millions)

Announce EBITDA EV / LTM

Date Buyer / Investor Target Target Description EV Revenue EBITDA Margin Revenue EBITDA

05/06/13 HEICO Corp. Reinhold Holdings Produces advanced custom composite components and complex

composite assemblies for commercial aviation, defense, and space

applications

NA NA NA NA NA NA

04/23/13 Honeywell

International, Inc.

RAE Systems Inc. Manufactures multi-sensor chemical and radiation detection monitors

and networks for hazardous material management, industrial safety, and

environmental remediation applications

$340.0 $107.0 $26.2 24.4% 3.18x 13.0x

04/23/13 Safran SA Rolls-Royce RTM322

Program (50% stake)

Develops, manufactures, and markets two-shaft turbofan aircraft engine 380.5 NA NA NA NA NA

04/22/13 TransDigm Group

Incorporated

Aerosonic Corp. Provides aircraft instrumentation including digital altimeters, airspeed

indicators, air data test sets, and other flight instruments

37.5 31.0 4.8 15.4% 1.21x 7.9x

04/18/13 Diversified Aero

Services Inc.

Aero Inventory (UK) Ltd A fully functional online sales platform, offering one of the world’s

largest inventories of aircraft parts, with over 200,000 SKUs (part lines)

supporting all major commercial aircraft and engines

NA NA NA NA NA NA

04/17/13 Measurement

Specialties, Inc.

Spectrum Sensors and

Controls, Inc.

A leader in the design and manufacture of custom temperature probes,

high reliability encoders, and inertial sensors

51.4 26.0 8.0 30.8% 1.98x 6.4x

04/17/13 Bohemia Interactive

Simulations

TerraSim, Inc. Provides automated terrain generation software for use in interactive

simulation systems for defense, emergency, and mission-critical

customers

NA NA NA NA NA NA

04/16/13 Merex Incorporated ALCO Services, Inc.

(Aircraft Logistic-

support Company)

Provides MRO services for auxiliary power units and engine driven

compressors, as well as a variety of other critical components for

hydraulic, pneumatic, fuel, and electrical systems

NA NA NA NA NA NA

04/16/13 Prospect Partners Velocity Aerospace

Group

Provides MRO services for commercial, corporate, regional, and

helicopter airline carriers through repair stations in Florida and

California

NA NA NA NA NA NA

04/08/13 Altran Technologies

SA

AirCaD SAS Provides engineering, modification, mechanical completion, and

simulation and structural analysis for aircraft interiors, cabins, avionics,

and other components

NA NA NA NA NA NA

04/04/13 Turkish Airlines

(THY)

MNG Technic Offers base maintenance services, such as scheduled or non-

scheduled periodic maintenance, light and heavy overhauls on

airframes, and component accomplishment

NA NA NA NA NA NA

04/03/13 Horst Engineering

& Manufacturing

Co.

Sterling Machine

Company

Manufactures jet engine components, specializing in close tolerance,

high precision components from high strength metals and polymers

NA NA NA NA NA NA

04/03/13 MidOcean Partners Noranco, Inc. Manufactures complex machined and sheet metal components, kits, and

assemblies for landing gear, aerostructures, and aero engine

applications

NA NA NA NA NA NA

04/02/13 Elgin Fastener

Group

Vegas Fastener

Manufacturing

Manufactures hot-forged bolts, nuts, and specialized parts for military

shipbuilding, power generation, and industrial applications

NA NA NA NA NA NA

03/29/13 Cornerstone

Capital Holdings

UTC Long Beach, CA

Operations (Keystone

Engineering)

Manufactures satellite propellant and pressure storage tanks, spun

domes, and ancillary space products

NA NA NA NA NA NA

03/27/13 Overall Capital

Partners

Honeycomb Company

of America

Provides bonded and composite assemblies for U.S. military aircraft

platforms

NA NA NA NA NA NA

03/25/13 The Safariland

Group

Mustang Survival Corp. Manufactures lifesaving equipment for recreational, military, law

enforcement, and industrial users in marine and aviation environments

NA NA NA NA NA NA

03/22/13 Nammo AS Pocal Industries Manufactures mortar training ammunition, non-lethal and practice

ammunition, ignition cartridges, and other training munitions systems

NA NA NA NA NA NA

03/20/13 Resilience Capital

Partners LLC

Aerospace Products

International

Distributes aircraft parts and accessories, and provides supply chain

solutions such as demand forecasting and inventory planning

NA NA NA NA NA NA

03/19/13 Erickson Air-Crane

Inc.

Evergreen Helicopters,

Inc.

Provides air transportation, avionics MRO, FBO, and logistics services 250.0 196.0 56.2 28.7% 1.28x 4.4x

03/18/13 Greenbriar Equity

Group LLC

Edac Technologies

Corp

Produces tooling, fixtures, molds, and jet engine components 140.9 106.5 13.7 12.9% 1.32x 10.3x

03/18/13 Arlington Capital

Partners

MB Aerospace Holdings Manufactures airframe components and assemblies, aero engine

components and assemblies, and ground support equipment

NA 81.0 NA NA NA NA

03/14/13 Precision Castparts

Corp.

AB SKF, Metallic Rods

Business

Manufactures metallic rods used in aerospace applications including

mechanism actuation, structures, and equipment suspensions

52.0 59.8 NA NA 0.87x NA

03/07/13 Saab AB Protaurius AB's Soft

Armour Assets

Manufactures ceramic material that provides ballistic protection for

personnel and military assets, including aircraft, ammunition storage,

and command centers

NA NA NA NA NA NA



Spring 2013

Select Recent Aerospace / Defense M&A, cont.(1) ($ in millions)



03/06/13 Sverica

International

Dexmet Corporation Manufactures highly engineered expanded foils and polymers for a

range of applications such as lightning strike protection for major

composite aircraft manufacturers

NA NA NA NA NA NA

03/04/13 Breidon, Inc.

(Ridge

Engineering)

The Bechdon Company Manufactures precision machined products for aerospace, defense,

and intelligence community customers

NA NA NA NA NA NA

03/04/13 PAI Partners ADB Solutions Manufactures airfield ground lighting products for large and small

airports, military bases, and heliports

NA $211.0 NA NA NA NA

03/04/13 RBC Bearings, Inc. Western Precision Aero Manufactures components and assemblies for aerospace, military, and

defense industries

$2.6 5.0 NA NA 0.52x NA

03/01/13 Turbine Controls,

Inc.

World Aircraft

Accessories, Inc.

Provides MRO, engineering, and leasing services, and manufactures

pneumatic, hydraulic, and mechanical tools for narrow body aircraft

NA NA NA NA NA NA

03/01/13 W.H. Smith

Hardware

Company

Certain LaBarge Hose

and System Assets

Manufactures fluid distributions systems, storage systems, specialty

vehicles, platforms, and components for military applications

NA NA NA NA NA NA

02/28/13 Exchange Income

Corp.

Regional One, Inc. Provides sale, leasing, lease-back, and maintenance management

services for engines, engine parts, avionics, fuel systems, and other

aircraft components

80.0 NA NA NA NA NA

02/27/13 Mission Ready

Equipment

Grey Group Training Provides training equipment and services for military and law

enforcement agencies

NA NA NA NA NA NA

02/25/13 Senior Aerospace

BWT

Atlas Composites

Limited

Designs and manufactures composite structures for military, civil, and

commercial markets, including UAV composites, satellite components,

and other aircraft components

3.8 NA NA NA NA NA

02/23/13 Boeing Company CPU Technology, Inc.,

Acalis Business

Acalis microprocessors contain unique hardware and software that can

guard mission-critical onboard systems in Boeing platforms

NA NA NA NA NA NA

02/22/13 Tactical Air

Defense Services,

Inc.

Air 1 Flight Support, Inc. Provides customer service for aircraft maintenance NA NA NA NA NA NA

02/18/13 Groupe Valliere

Aviation

Latecoere Aeroservices

SAS

Provides line and base maintenance, aircraft storage, aircraft painting,

modifications, structural repairs, and landing gear change services

NA NA NA NA NA NA

02/15/13 A Plus Finance SA Vision Systems Offers cockpit door modules, sunvisors, video controls, new-tech

composite doors, integrated modular systems for IFE, and cabin

management products

NA NA NA NA NA NA

02/07/13 Astrex Electronics,

Inc.

TIM-CO/CAL-RF Distributes electronic components focused on the commercial aviation,

space, oil and gas, industrial, and military markets

NA NA NA NA NA NA

01/31/13 Dynamic Precision

Group, Inc.

Paradigm Precision

Holdings

Manufactures precision machined aerospace engine components 129.0 NA NA NA NA NA

01/29/13 Teledyne

Technologies

Reson A/S Manufactures high-resolution marine acoustic imaging and

measurement solutions, including multi-beam sonar systems, single-

beam echo sounders, transducers, and hydrophones

69.2 NA NA NA NA NA

01/29/13 TriMas Corporation Martinic Engineering Manufactures precision machined parts for auxiliary power units and

electrical, hydraulic, and pneumatic systems

19.0 13.0 NA NA 1.46x NA

01/29/13 Goldner Hawn

Johnson &

Morrison, Inc.

Universal Turbine Parts,

Inc.

Provides turboprop aircraft engine products and related services to

MRO facilities, fleet operators, and engine parts dealers

NA NA NA NA NA NA

01/24/13 Kidd & Company /

Centerfield Capital

Partners

Imaginetics, Inc. Manufactures precision metal components and assemblies for the

aerospace industry

NA NA NA NA NA NA

01/17/13 Triumph Group Goodrich Pump &

Engine Control Systems

Manufactures fuel pumps and controls for commercial and military

aircraft OEM engine manufacturers

200.0 195.0 $25.4 13.0% 1.03x 7.9x

01/17/13 The Atlas Group Brenner Aerostructures Specializes in bonding of metals, anodizing of phosphoric acids, and

stretch-forming for the aerospace industry

NA NA NA NA NA NA

01/17/13 Tinicum L.P. Aerofit, Inc. Manufactures high and low pressure fluid fittings and fitting systems for

aerospace applications

NA NA NA NA NA NA

01/16/13 Cubic Corporation

(Cubic Defense

Australia)

PS Management

Consultants Pty Ltd

Provides specialist engineering and project management services for

Australian Defense Forces training, simulation, communications, and

range safety programs

NA NA NA NA NA NA

01/15/13 Ontic Engineering

& Manufacturing

(BBA Aviation)

Zodiac Oxygen

Systems, certain assets

Manufactures tail wheel assemblies, brake valves, temperature and

pressure gauges, and first aid kits for aerospace applications

NA NA NA NA NA NA



Spring 2013

Select Recent Government Services M&A(1) ($ in millions)



04/22/13 Birch Hill Equity

Partners

Management Inc.

Softchoice Corporation Provides IT infrastructure solutions to enterprise, government, and small

business customers in the U.S. and Canada

$334.8 $1,066 $52.6 4.9% 0.31x 6.4x

04/02/13 EOIR

Technologies, Inc.

Viecore Federal

Systems Division, Inc.

Provides decision support technologies and data management systems

for the U.S. military and homeland security communities

NA NA NA NA NA NA

03/27/13 True North

Logistics

RAMTECH Support

Services, Inc.

Provides operations and maintenance, systems engineering, and

technical assistance, primarily to the Department of Defense and other

federal agencies

NA NA NA NA NA NA

03/14/13 ORBCOMM Inc. System Planning

Corporation

GlobalTrakDivision

Provides real-time situational awareness and intelligence for military,

government, and commercial customers

NA NA NA NA NA NA

03/08/13 The Parsons

Corporation

First Support Services,

Inc.

Provides operations and maintenance services, primarily facility

support, for the U.S. government, Department of Defense, state and

local government agencies, and commercial businesses

NA 50.0 NA NA NA NA

03/04/13 MacAulay-Brown,

Inc.

Luna Innovations,

Secure Computing and

Comm. Group

Provides technical services for electronic components and methods with

a focus on critical U.S. military and national security applications

6.7 NA NA NA NA NA

02/15/13 Ball Aerospace &

Technologies Corp.

OGSystems TASER

Business Unit

Provides high-end mission analysis, systems and software engineering,

integration, and IT services for the National Geospatial-Intelligence

Agency

NA NA NA NA NA NA

01/30/13 DC Capital

Partners, LLC

Computer Security

Solutions, Inc.

Provides technology solutions for the intelligence community NA NA NA NA NA NA

01/23/13 Network Designs,

Inc.

BitSec Global Forensics Provides digital forensics, electronic discovery, data breach

investigations, and training for federal and state investigative agencies,

law firms, and corporations

NA NA NA NA NA NA

01/22/13 Projility, Inc. SharkPro Software

Corporation

Provides integrated work management solutions for commercial and

government customers by building complementary tools for Microsoft

Project Server

NA NA NA NA NA NA

01/09/13 Kavaliro Staffing

Services

Salient Federal

Solutions, Inc. Fannie

Mae Division

Provides Fannie Mae with additional support employees to implement IT

and engineering solutions

NA 10.0 NA NA NA NA

01/09/13 ManTech

International

Corporation

ALTA Systems, Inc. Provides a broad range of IT support to government and private industry

clients with a particular focus on the healthcare sector

NA NA NA NA NA NA

01/07/13 Vistronix, Inc. Technology Associates

International

Corporation

Provides IT, business, and management consulting services to

government and commercial clients

NA NA NA NA NA NA

12/31/12 CACI International

Inc.

IDL Solutions Inc. Provides IT professional services, including application development,

business process management, web design and marketing, and

enterprise network and infrastructure management

NA 18.5 NA NA NA NA

12/31/12 Booz Allen Hamilton

Holding

Corporation

SDI Corporation Provides advanced, multi-disciplinary engineering capabilities for

customers in both the government and commercial sectors

NA NA NA NA NA NA

12/28/12 CRGT, Inc. Guident Technologies,

Inc.

Provides business intelligence and systems engineering services,

including business analytics, Big Data, strategy and planning, data

warehousing and management, and financial analytics solutions

NA NA NA NA NA NA

12/21/12 Altamont Capital

Partners

OMNIPLEX World

Services Corporation

Provides professional intelligence support, investigative, and physical

security services to corporations and government agencies

NA NA NA NA NA NA

12/20/12 Mind Over

Machines, Inc.

The Seva Group, Inc. Provides IT consulting services in the Mid-Atlantic region to customers

in financial services, publishing, healthcare, non-profit, and the public

sector markets

NA NA NA NA NA NA

12/17/12 Camber

Corporation

Novonics Corporation Provides high-quality program management, architecture definition,

systems engineering, and software development services for

government customers

NA NA NA NA NA NA

12/17/12 Cubic Corporation NEK Special Programs

Group, LLC

Provides advanced and specialized courses for the U.S. Special

Operations Command

NA NA NA NA NA NA

12/14/12 GAITS, Inc. Project Performance

Corporation

Provides management and IT consulting services with a focus on the

environmental and energy sectors

NA NA NA NA NA NA

12/12/12 Research Triangle

Institute

MPR Associates, Inc. Provides research and data tools, as well as consulting services for

educators, policymakers, and the public

NA NA NA NA NA NA

12/05/12 SRA International,

Inc.

MorganFranklin National

Security Solutions

Business Unit

Provides tactical C4ISR, cybersecurity, intelligence analysis, continuity

of operations, emergency planning, information assurance, and project

management office support

34.2 NA 8.2 NA NA 4.2x

12/04/12 Hyland Software,

Inc.

SIRE Technologies, Inc. Provides content management, agenda and workflow automation,

application integration, streaming video, and electronic plan review

specifically tailored to the needs of state and local government

NA NA NA NA NA NA

13


Spring 2013

Select Recent KippsDeSanto & Co. Advised Transactions

has been acquired by

a portfolio company of

March 2012


July 2012


July 2012



October 2012


December 2012


November 2012


has merged with

February 2012


November 2011

sale of its Special

Programs Group to

December 2012


December 2012


December 2012


March 2012

Recognized in Washington Technology’s “Who Made 2012’s Biggest Deals?” Report

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About KippsDeSanto & Co.

KippsDeSanto is an investment banking firm focused on delivering M&A and financing expertise. Our solutions are focused on the technology sectors we know – Aerospace / Defense and Government Services. We are recognized for our depth of industry experience, knowledge of sector-specific transaction drivers, and long-standing relationships with industry participants.

We welcome the opportunity to have a more detailed discussion of developments in our focus industries. For more information, please contact us:

Robert D. Kipps Managing Director [email protected] Marc B. Marlin Director [email protected] Karl M. Schmidt Director [email protected] K. Packard Fancher Director

[email protected]

Aaron M. Sharp Vice President

[email protected]

Christos G. Tsentas Associate [email protected]

Kevin P. DeSanto Managing Director [email protected] Michael J. Misantone Director [email protected]

Jon Yim Director [email protected]

Toby Albright Vice President

[email protected] Robert G. Dowling Associate

[email protected] Brian T. Tunney Associate [email protected]

Connect with KippsDeSanto:

The information and opinions in this newsletter were prepared by KippsDeSanto & Co. and the information herein is believed to be reliable and has been obtained from and based upon public sources believed to be reliable. KippsDeSanto & Co. makes no representation as to the accuracy or completeness of such information. Opinions, estimates, and analyses in this newsletter constitute the current judgment of the author as of the date of this newsletter. They do not necessarily reflect the opinions of KippsDeSanto & Co. and are subject to change without notice. This newsletter is meant to impart general knowledge about a sector or industry and is not expected to provide reasonably sufficient information upon which to make any investment decisions. KippsDeSanto & Co. is not affiliated with any of the companies identified in this newsletter. Unless otherwise described, the companies identified are also not affiliated with one another.

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