A&D Weekly - January 29, 2024

Industry Headline News

Boeing's recent setbacks, including the mid-air incident with its 737 Max series, have raised concerns about its competitiveness against Airbus
Jan. 27, 2024 - The European plane maker, holding 62% market share in the narrow-body segment, is thriving while Boeing faces production challenges and customer dissatisfaction. The power balance in the aerospace duopoly is shifting, potentially impacting supply chains and airline customers, with new entrants like China's Comac posing a future challenge. (Financial Times)

Defense firms, including Lockheed Martin, express concerns about the government's reliance on fixed-price contracts
Jan. 25, 2024 - Lockheed Martin's CEO, Jim Taiclet, mentioned a shift in their approach, stating they no longer have any "must-win programs." Pentagon officials acknowledge the reconsideration of fixed-price contracts, emphasizing the need for a more flexible approach that considers factors beyond cost, such as market changes and the strategic importance of suppliers. (Reuters)

BAE Systems is collaborating with the UK government on Saudi Arabia's formal requirements for a delayed order of 48 Eurofighter Typhoon fighter jets
Jan. 25, 2024 - The order had previously stalled due to German objections, but is now advancing after Germany lifted the arms delivery block. An announcement regarding the deal is anticipated at the upcoming World Defense Show in Riyadh. (Breaking Defense)

Gulfstream's 2023 business jet deliveries were impacted by delays in FAA certification for the G700, causing a revenue loss of $1 billion
Jan. 24, 22024 - Despite delivering 111 jets last year, missing the revised estimate of 133-135, Gulfstream aims to deliver 160 jets in 2024, including 50 G700s, with projected increases of 12% and 33% in aerospace revenues and earnings, respectively. (AIN Media)

Gulfstream dominates the U.S. ultra-long-range private jet market with a staggering 67% share
Jan. 24, 2024 - Key models contributing to this dominance include the G700, G650ER, and G550, with the G550 highlighted as the leading model. Bombardier holds a 26% market share, while Dassault owns 7%, making up the remaining market share in the United States. (Simple Flying)

United and Alaska Airlines expressed frustration with Boeing over manufacturing problems that grounded over 140 planes
Jan. 23, 2024 - Alaska Airlines CEO demanded improvements in Boeing's quality programs, while United's CEO called for "real action" to restore Boeing's quality reputation. United is considering alternatives to buying a future, larger version of the Boeing 737 Max. (AP News)

The Pentagon has officially approved the production of the B-21 Raider stealth bomber after successful testing at Edwards Air Force Base
Jan. 22, 2024 - Under Secretary of Defense William LaPlante confirmed that production is moving forward on positive results from ground and flight tests. The B-21 Raider is designed to replace the B-2 Spirit and B-1 Lancer, with plans to purchase at least 100 bombers for service mid-2020s. (Breaking Defense)

Weekly Transaction Review

No.	Parties Involved	Transaction Metrics			Location	Segment
	Target [Parent] Acquirer [Parent]	Price ($M)	Price/ Revenue	Price/ EBITDA	Target	Target
1	Kencoa Aerospace IMM Investment Corp	-	-	-	Sacheon, South Korea	Machined & Cast Parts
2	Empower Equity Leonid Capital Partners	-	-	-	Ithica, NC	Government Services, IT Services and Software
3	Pilgrim Aerospace Fasteners MEIDOH	-	-	-	Chandler, AZ	Machined & Cast Parts
4	Spalding Consulting, Inc. Saalex Corp	$75.0	-	-	Lexington Park, MD	Government Services, IT Services and Software
5	Merrill Technologies Arlington Capital Partners LP	-	-	-	Saginaw, MI	Machined & Cast Parts
6	Metal Trades Arlington Capital Partners LP	-	-	-	Hollywood, SC	Navy/Maritime

No.	Target Descriptions
1	Kencoa Aerospace provides aerospace products for OEM and top-tier customers in South Korea and the United States. It offers aerostructures, systems, and components for business and regional jets; commercial aerospace products; and aircraft products and aftermarket solutions for military and defense applications. IMM made a significant minority investment into Kencoa.
2	Empower Equity (EMPEQ) is a provider of artificial intelligence powered surveying solutions for private sector and U.S. federal government aerospace and defense markets. The company's flagship platform, FastSite Survey, enables rapid and accurate identification of equipment and parts, ensuring the integrity and reliability of military and critical infrastructure hardware.
3	Pilgrim Aerospace Fasteners is a manufacturer and provider of screws, bolts, rivets, clevis pins, super alloys and other fasteners for the aerospace industry. The company's capabilities include testing, engineering, and specialty designing.
4	Spalding Consulting is a provider of software development, information technology (IT), and engineering services for private sector and U.S. federal government defense markets. Additionally, the company provides R&D, rapid prototyping, web development, DevOps, and legacy systems migration.
5	Merrill Technologies provides contract manufacturing services to the defense, aerospace, heavy equipment, automation, energy and transportation markets. The company's resources are dedicated to the design, fabrication, machining and integration of components, systems and programs.
6	Metal Trades is a commercial manufacturer and fabricator of large steel and sheet metal industrial components and structures with custom machining and ship repair capability. The company's capabilities include deep water access, heavy lifting, blast & paint, and processing.