Key Takeaways
CATCH UP QUICKLY: From the explosive growth of defense tech to private equity’s role in shoring up the A&D supply chain, here are some of the insights from this edition of ACG’s Aerospace & Defense Report.
In Defense of Proven Business Models Defense tech is undergoing tremendous growth, and some private equity-backed platforms are acquiring younger, innovative tech providers as add-ons. A more typical entry point into the defense market for private equity, however, is through investments in technology providers with a multi-decade history of proven results or established businesses within the defense supply chain. Mind the IT Talent Gaps IT talent can make or break a carve-out. Buyers must know before close which cybersecurity, governance, infrastructure, and compliance capabilities will transfer from the parent to avoid Day 1 gaps, costly TSA exten- sions, and delayed value creation.
The New SaaS The A&D sector has seen an uptick in mergers and acquisitions and attracted new investors, in large part because of the long-term contracts that many A&D businesses have with government agencies. That predictable, recurring revenue model is not unlike that of the software industry, prompting one investment banker to refer to it as the “new SaaS.” Supplying the Demand Scarce capacity is driving A&D supply chain invest- ment. With demand rising across commercial aero- space, space, and defense, suppliers with specialized manufacturing capabilities, single-source positions, or hard-to-replicate components are becoming especially valuable M&A targets.
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