Tag Archives: Defense M&A

Aronson Capital Partners Advises Tri-Star Engineering, Inc. on its Sale to G Force, Inc.

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Aronson Capital Partners (“ACP”) is pleased to announce the acquisition of Tri Star Engineering, Inc. tri star tombstone (“Tri Star” or the “Company”) by G Force, Inc. ACP served as the exclusive financial advisor to Tri Star in this transaction.

Headquartered in Bedford, IN, and strategically located close to the Naval Surface Warfare Center Crane Division (“NSWC Crane”), Tri Star provides the U.S. Navy with a wide range of services in the areas of electronic warfare, radar system prototyping, refurbishment, and repair support, information operations and support, life cycle logistics and systems engineering and integration services. The Company operates

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Aronson Capital Partners Cited – Harris makes $4.75B deal for Exelis

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Harris Corp. is buying Exelis in a $4.75 billion cash and stock deal that the company is calling mandatransformational.

The deal will significantly increase the size of Harris, adding $3.25 billion in revenue to Harris’ $5 billion in revenue. Headcount will grow to 13,000 to 23,000. The transaction is expected to close by June.

Adding scale was definitely one of the factors the drove the deal, according to Harris executives and industry analysts.

“The combination of the two companies’ highly complementary core franchises creates a competitively stronger company with significantly greater scale,” said Harris CEO and chairman William Brown.

Much of that scale will come in the defense market, where Harris adds Exelis’ strong position to its own. Sixty-one percent of Exelis customer base comes from defense customers. About 75 percent of Harris’ revenue is DOD and intell related.

Exelis and Harris also both have significant international and commercial sectors. Pre-acquisition, the

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Defense M&A: Corporate Spinoffs

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The recent speculation that Textron is considering a spinoff of some of its business units, including Cessna Aircraft, is revealing of a growing trend in which diversified conglomerates face pressure from activist investors to dispose of certain defense-related business units. Rumors of a possible sale of the Cessna business unit have been fueled by the reported interest of activist investor Ralph Whitworth’s Relational Investors. According to Reuters, Relational Investors examined Textron as a potential target for a change in strategy a month ago; however, the activist firm has since stated that Textron was never a serious prospect.

Activist investors, like Relational Investors, have determined the slower growth federal contracting verticals of large conglomerates to be a drain on company valuations. To unlock shareholder value, investors are pushing for breakups or spinoffs of segments with a stagnant or declining growth outlook. These changes come as the wars in Afghanistan and Iraq wind down and major cuts are being made to the U.S. government’s defense budget. With the growing deficit and increasing budgetary strain, the trend of spinning off low-growth businesses from diversified conglomerates is likely to continue into 2012, with or without investor pressure.

Relational Investors has been known to pressure diversified conglomerates to split up in recent years. In October 2011, ITT Corporation spun off Exelis Inc., its Defense and Information solutions business, and Xylem Inc., its Water Technology and Services business, resulting in three distinct publicly traded companies. Relational cofounder Ralph Whitworth told Reuters that the hedge fund urged the company to sell its defense unit to a private equity firm and spin off its basic industrials business after accruing a 3.93% stake in the company and nominating three directors to the company’s board. ITT instead announced its two planned spinoffs, possibly in order to avert a proxy contest with Relational Investors, although ITT’s Chairman and CEO, Steve Loranger, maintains that the decision to break up the company was made with no investor pressure.

Relational also played a role in the pending spinoff of certain government services operations of L-3 Communications, which is expected to be completed in the first half of 2012. The firm became the largest shareholder in L-3 in June 2011 after acquiring an almost 6% stake in the company, when it began pushing for the conglomerate to spin off its low-margin and slow-growth businesses.

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