Q Aerospace, Defense & Government Services Quarterly Industry Update 2 nd Quarter 2017

Transcription

1 Aerospace, Defense & Government Services Quarterly Industry Update 2 nd Quarter 2017 Mergers & Acquisitions Support Business Valuation Corporate Finance The McLean Group 7918 Jones Branch Drive, Suite 750 McLean, VA

2 Capital Markets Summary Industry News Notable M&A Activity The White House brought together a number of leading technology CEOs for the first Technology Council, seeking to transform and modernize federal IT. The meeting highlighted the importance of data center consolidation, cloud migration and modernizing legacy systems, which has been an administrative goal since requesting $95 billion for IT-related spending. The administration gave the Pentagon authority to set troop levels in Afghanistan with a potential near-term increase of 1,000 troops, in addition to the 8,400 US troops currently deployed. Hacking activity focused on foreign and domestic commercial targets, including ransomware attacks such as WannaCry, have caused concern over the proliferation of certain cyber capabilities, leading the government to call for action. The VA announced plans to transfer electronic medical records to the same electronic systems used by DoD. It is estimated that the transition will cost more than $4 billion. There is no estimated timeline but preliminary implementation plans are in process. President Trump signed an executive order to bolster federal networks cyber security and to urge agencies to adopt the National Institute of Standards and Technology framework to defend against cyber threats. Vanderlande Industries B.V. acquired security software company Optosecurity, Inc. for an undisclosed amount. Mercury Systems, Inc. acquired privately-held Delta Microwave, LLC for approximately $40.5 million. L3 Technologies, Inc. acquired Open Water Power, Inc. for an undisclosed amount. Veritas Capital Fund Management, LLC acquired Harris Corp s government services business for approximately $690 million. In early July, Preferred Systems Solutions pulled out of its deal with the STG Group after STG failed to secure $119.8 million in financing. Additionally, H.I.G. Capital announced that it plans to acquire NCI Inc. for approximately $283 million. % Change The McLean Group ADG Public Indices June 2017 TTM Defense Prime Index 1.0% 7.5% 29.6% Defense Systems Index (5.2%) (0.9%) 23.9% Diversified Government Services Index (8.4%) 1.0% 16.0% Middle Market Government Services Index 5.2% 27.1% 33.8% Large Cap Aerospace Index 2.1% 10.7% 32.1% Mid Cap Aerospace Index 0.3% 3.4% 28.5% Small Cap Aerospace Index (1.3%) 1.1% 14.0% International Aerospace Index (1.7%) 13.6% 33.% S&P 500 (0.3%) 2.7% 15.2% Source: Public Filings, Industry Newswires, S&P Capital IQ 2 2

3 M&A Activity Summary Transaction Activity Summary The McLean Group tracked 50 announced Defense and Government Services transactions during, representing a higher level of activity from that in Q and an increase from the 42 transactions tracked a year ago in Q saw an increase in acquisition activity by financial sponsors, representing 34% of buyer activity up from 27% in Q Among strategic buyers, public companies remained slightly less active than private buyers for the quarter. Notable transactions involved public buyers, including Smiths Group s acquisition of Morpho Detection, LLC for about $723 million, followed by Smiths subsequent divesture of its Explosive Trace Detection business to OSI Systems, Inc. for $75.5 million. North American Aerospace M&A activity increased in to 35 transactions from 32 in Q Financial sponsors represented 40% of acquisitions while public and private strategic buyers accounted for 31% and 29% of acquisition activity, respectively. Safran S.A. represented the largest transaction of the quarter in its announced acquisition of Zodiac Aerospace S.A. for an implied enterprise value of $9.23 billion. Acquisitions by Sector Government Services Acquisitions by Buyer Type Q Q Q Q % 38% 40% 34% 40% 27% 42% 39% 26% 31% 35% 33% 34% 27% 14% Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Defense & Government Services Aerospace Financial Public Private Source: Public Filings, Industry Newswires, S&P Capital IQ 3 3

4 Industry Trends Defense & Gov. Services Defense & Gov. Services Trends Notable Acquisitions and Consolidations 50 unique M&A transactions defined the second quarter of Multiple large defense contractors and financial sponsors expanded their defense capabilities and portfolios by focusing on acquisition targets with high growth, advanced defense technologies and applications that serve multiple end-markets with strong trajectories. Buyer AND Target During the second quarter, a number of transactions in the defense products space revolved around Unmanned Underwater Vehicles (UUVs) and other robotics technology, with players like L-3 Technologies, SoftBank, and Alphabet. Companies that develop and manufacture relevant systems and technologies for this new breed of unmanned vehicles are seen as attractive investments. Additionally, interest in acquiring companies with simulation and virtual modeling capabilities for defense and military customers and end-markets grew in. Companies specializing in cuttingedge technologies for mission-critical scenario generation were purchased by primes or private equity groups. Physical and digital threat detection and security were also significant themes of M&A activity. OSI Systems bolstered its threat protection business by acquiring the Smiths Group s Explosive Trace Detection business, while Honeywell purchased Nextnine, increasing its cyber security and remote asset protection capabilities for industrial sites. from Selected Defense & Gov. Services Transaction Sentiment Analysis STG Group Acquisition of PSS (Fell Through) Veritas Acquired Harris Government Services Very Negative Negative Neutral Positive Very Positive TMG performed social analytics to determine the overall sentiment towards select transactions. The tool searches for keywords, phrases, keyword combinations, and hashtags across 30+ social media sources. Based on a search, the tool processes language to determine an overall analysis on sentiment. Source: Public Filings, Industry Newswires Explosive Trace Detection Business 4 4

5 Industry Trends - Aerospace Aerospace Trends Notable Acquisitions and Consolidations In 2017 s second quarter, M&A activity in the aerospace industry increased slightly to 35 total transactions from 32 a quarter prior. Within the larger aerospace industry, component and subsystem manufacturers experienced the highest quantity of quarterly M&A transactions in the last five years. Strategic buyers once again dominated the aerospace M&A market as they continue to increase economies of scale and widen competitive positioning in response to ongoing pressure from OEMs to reduce product offerings margins. Strong international and domestic passenger growth and inefficient aircraft replacement continues while M&A activity shifts away from the Maintenance, Repair, and Overhaul (MRO) markets. Existing aircraft fleets are replaced rather than repaired due to continued technological advances. Competitors in this industry seek to enter aerospace intermediary goods and services markets. These highly-specialized products offer a wide range of applications across aerospace and industrial markets and are less susceptible to obsolescence from modernization. During the second half of 2017, the aerospace M&A landscape will likely remain active with continued consolidation among component manufacturers and other supporting providers as demand remains strong for new aircraft. Selected Aerospace Transaction Sentiment Analysis Buyer Target Safran Acquired Zodiac Aerospace GE Aviation Acquired OC Robotics Very Negative Negative Neutral Positive Very Positive TMG performed social analytics to determine the overall sentiment towards select transactions. The tool searches for keywords, phrases, keyword combinations, and hashtags across 30+ social media sources. Based on a search, the tool processes language to determine an overall analysis on sentiment. Source: Public Filings, Industry Newswires 5 5

6 Machine Learning & Artificial Intelligence AI Market Activity As a component of the ongoing Third Offset strategy, the United States military and its partners are increasingly looking to the future of warfare in machine learning (ML) and artificial intelligence (AI). The Department of Defense is exploring an extensive set of potential capabilities to exploit these fields, including stopping cyber attacks autonomously, increasing drone usage for payload delivery, predicting enemy actions through pattern recognition, and self-driving military convoys among others. The Defense Advanced Research Projects Agency (DARPA) continues to increase funding for projects in both the AI and ML fields, with growing strategic focus on improving the explainability of the deep-learning process of AI systems. David Gunning, DARPA program manager, has stated that explainability will be crucial in the justification of autonomous AI military action and the further refinement of the technology. Increasing military focus on leveraging machine learning and artificial intelligence is expected to push the technology toward viable tools that intelligence agents and military operatives can utilize in both defensive and offensive strategies. Supporting advancements in this technology is an exponential growth opportunity for companies in the defense sector that have existing exposure or are seeking to increase exposure through selective acquisition activity. Brain-Like Super Computers Direct Defense Capabilities Big Data Interpretation & Predictive Analytics Enhanced Autonomous Weapon Systems Threat Detection, Tracking & Protection Pattern Recognition & Probability Forecasts Optimization of Staff Decision Making DoD Applications IBM and the US Air Force are teaming up to develop a supercomputer that mimics the analytical power of the human brain. With the strength of 64 million neurons, the system only requires the energy of one lightbulb. IBM s newly engineered neurosynaptic chip mimics the capabilities of the right side of the brain with more autonomous data processing and sensory perception capabilities. Recent M&A Activity Invested In Acquired Acquired Acquired Source: Public Filings, Industry Newswires, S&P Capital IQ Project Maven DoD established a new effort, Project Maven, to accelerate and enhance the implementation of machine learning and artificial intelligence technologies throughout the military. A newly formed special group, the Algorithmic Warfare Cross Functional Team, will lead the counter-terrorism efforts of Project Maven. The team s first task is to augment the Pentagon s hunt for ISIS, using algorithms and AI technologies to track both militants and predict their movements. General Shanahan Director of Defense Intelligence The integration between our respective initiatives and organizations will be immensely beneficial 6 6

7 Growth Found Underwater UUV Market Growth The unmanned underwater vehicles (UUV) industry is primed for growth in the defense and commercial markets, with a projected multi-billion dollar market size in the near future. With cross industry capabilities and the functionality to meet the demands required by multiple end-markets, the new breed of vehicles represent a valuable tool set for a variety of customers, including the defense, civil, commercial, and scientific markets. The UUV space is in the early stage of its life cycle and is well positioned for growth as the technology is improved, relevant applications come to light, and as members of various industries begin to understand and harness the power and utility of these autonomous machines. Target Markets Naval & Military Offshore Oil & Gas Maritime & Ocean Research Major Players The underwater market represents a natural expansion opportunity for firms with existing exposure to the unmanned autonomous vehicle (UAV) market, particularly aerial systems, as these firms seek growth in adjacent, synergistic markets. It is potentially faster and less costly for large competitors to acquire IP and UUV technology capabilities than to develop them in-house. Increased M&A attention may also drive up target valuations, as IP and UUV capabilities may be viewed at a premium. While there was relatively little M&A activity in the sector over the last year, companies with UUV exposure represented two acquisitions by L3 in this quarter. In April, L3 acquired OceanServer Technology, Inc. which develops and manufactures UUVs and a portfolio of relevant technologies. OceanServer is said to bolster L3 s capabilities in the growing, highlyspecialized market and complement L3 s current sensor, communication, and ISR capabilities. In May, L3 acquired Open Water Power, Inc., a developer of high-energy-density underwater power generation technologies for naval platforms, specifically UUVs. Its breakthrough advancements are said to provide safer power generation abilities for UUVs and significantly enhance the endurance capabilities of the current systems. Michael Strianese Chairman & CEO of L3 Recent Transactions Acquired Given the U.S. Navy s focus on UUV technology, we believe we are well-positioned in this high priority, high-potential growth area. Source: Public Filings, Industry Newswires, S&P Capital IQ 7 7

8 Notable M&A Transactions acquired acquired acquired Closed April 2017 Mercury Systems, Inc. acquired privately-held Delta Microwave, LLC. Oxnard, Calif.-based Delta Microwave, LLC is a designer and manufacturer of high-value radio frequency (RF), microwave and millimeter wave subassemblies and components for the military, aerospace and space markets. Delta's products are routinely selected over competitors due to their compact and complex packaged form factors and integrated functionality. Closed June 2017 PAE, a portfolio company of Platinum Equity, acquired FCi Federal, Inc. Ashburn, Va. based FCi Federal, Inc. provides a wide range of managed professional, administrative and technical services to federal agencies, with core expertise in program management support, records management, adjudication support, fraud detection and other administrative support services. Closed April 2017 L3 Technologies, Inc. (NYSE: LLL) acquired privately-held OceanServer Technology, Inc. Fall River, Mass.-based OceanServer Technology, Inc. develops and manufactures autonomous, lightweight UUVs. Since its inception in 2003, OceanServer Technology has established itself within a growing specialized market, providing highly capable UUVs to a wide array of military, commercial and international customers. Source: Public Filings, Industry Newswires 8 8

9 Notable M&A Transactions Mission Systems acquired acquired acquired Government IT Services Business Electronics and Communications Division Closed April 2017 ECS Federal, LLC acquired privately-held InfoReliance Corp. Fairfax, Va.-based InfoReliance Corp. is a provider of cybersecurity, cloud computing, software engineering solutions and managed services. George Wilson, CEO of ECS Federal, stated: "In the past five years ECS has transformed from a services company to a rapidly growing performer, systems integrator, and solution provider in the national defense and intelligence markets. Closed April 2017 MHVC Acquisition Corp., an entity formed by private equity firm Veritas Capital Fund Management, LLC, acquired the government IT services business of Harris Corp. Harris' Herndon, VA.-based government IT services business provides IT and engineering managed services to U.S. government agencies, including supporting NASA's Space Communications Network and Deep Space Network programs, and operates within the company's Critical Networks segment. Closed May 2017 General Dynamics Mission Systems, a business unit of General Dynamics Corp. (NYSE: GD) acquired the Electronics and Communications Division of Advatech Pacific, Inc. The Dayton, Ohio-based Electronics and Communications Division of Advatech Pacific designs and manufactures tactical, cyber-secure and cross-domain products for the U.S. Department of Defense and international military customers. The division has two cross-domain products which will become part of GD's cybersecurity product line. Source: Public Filings, Industry Newswires 9 9

10 Notable M&A Transactions acquired acquired acquired Closed May 2017 Belcan, LLC, a portfolio company of investment firm AE Industrial Partners, LLC, acquired Schafer Corp. from private equity firm Metalmark Capital Partners. Arlington, Va.-based Schafer Corp. is a provider of scientific, engineering, and technical services to numerous military and civil government agencies. Schafer employs experts in areas such as CBRNE (chemical, biological, radiological, and nuclear defense), space systems, air and missile defense, and cybersecurity. Closed May 2017 Luminator Technology Group, LLC, a portfolio company of Audax Group, acquired Apollo Video Technology, LLC. Apollo Video Technology, LLC, is a provider of mobile video surveillance and fleet and information management solutions for mass transit, school transportation, law enforcement, and military and government applications. Closed July 2017 CSRA, Inc. acquired privately-held NES Associates, LLC. Alexandria, Va.-based NES provides mission critical networking and telecommunications support. NES specializes in IT infrastructure architecture planning, design, and installation services, network operations and support, telecommunications bandwidth optimization, data center design, operations, and consolidation; application and software development; and cybersecurity. Source: Public Filings, Industry Newswires 10 10

11 Notable M&A Transactions acquired will acquire will acquire Explosive Trace Detection Business Closed May 2017 L3 Technologies, Inc. (NYSE:LLL) acquired privately-held Open Water Power, Inc. Omerville, Mass.-based Open Water Power, Inc. is developing safe and high-energy-density undersea power generation technologies for use by UUVs and other maritime platforms. Its breakthrough aluminum-water platform technology enables safe power generation solutions for UUVs and results in significant safety and endurance improvements over current technologies. Source: Public Filings, Industry Newswires Announced June 2017 Honeywell International, Inc. (NYSE: HON) signed a definitive agreement to acquire privately-held Nextnine, Inc. New York, N.Y.-based Nextnine, Inc. is a provider of security management solutions and technologies for industrial cyber security. Nextnine's flagship technology, ICS Shield, protects industrial sites from cyber security attacks and enables remote monitoring of assets. Founded in 1998, Nextnine has been backed to date by Infinity VC, XT Hi-Tech and several other prominent investors. Announced June 2017 OSI Systems, Inc. signed a definitive agreement to acquire the global explosive trace detection (ETD) business from Smiths Group plc for $75.5 million in cash, subject to certain adjustments as of the closing date. The Andover, Mass.-based explosive trace detection (ETD) business is a leader in trace detection with a current worldwide installed base of approximately 11,000 units. The technology is used in airports and by the military

12 Capital Markets Overview Custom Index Performance Defense and Gov. Services 30.0% 25.0% 27.1% 20.0% 15.0% 10.0% 5.0% 0.0% 7.5% 2.7% 1.0% -0.9% -5.0% Apr Apr Apr Apr May May May May May Jun Jun Jun Jun Defense Prime Index Middle Market Index Diversified Government Services Index Defense Systems Index S&P 500 Index Constituents and Stock Price as a % of 52-Week High Defense Prime Index 98% 97% 98% 98% 98% Defense Systems Index 84% 79% 96% 96% 94% 94% Diversified Government Services Index 82% 94% 73% 92% 91% 78% Middle Market Index Source: Public Filings, S&P Capital IQ 80% 69% 98% 100% 94% 99% 12 12

13 Capital Markets Overview Custom Index Performance Aerospace 20.0% 15.0% 10.0% 13.6% 10.7% 5.0% 0.0% 3.4% 2.7% 1.1% -5.0% Apr Apr Apr Apr May May May May May Jun Jun Jun Jun Large Cap Aerospace Index Mid Cap Aerospace Index Small Cap Aerospace Index International Aerospace Index S&P 500 Source: Public Filings, S&P Capital IQ Index Constituents and Stock Price as a % of 52-Week High Large Cap Aerospace Index 96% 98% 96% 94% 92% 100% Mid Cap Aerospace Index 86% 95% 93% 96% 95% 97% 93% 80% Small Cap Aerospace Index 90% 100% 75% 90% 52% 94% 97% Int l Aerospace Index 94% 86% 74% 91% 94% 95% 98% 95% 13 13

14 Public Market Valuations: EV/EBITDA Defense and Government Services Average: 12.1x Median: 11.9x Defense Prime Index Defense Systems Index Diversified Gov. Services Middle Market Index Average: 12.7x Average: 12.3x Average: 11.3x Average: 12.2x 13.5x 13.4x 13.0x 12.9x 10.8x 14.0x 12.6x 12.1x 12.1x 12.1x 10.9x 11.9x 11.9x 11.5x 11.4x 10.8x 10.6x 24.0x 10.1x 10.0x 9.9x 9.5x 9.4x LMT NOC GD RTN BA Note: Multiples based on 2017 estimated EBITDA Aerospace TDY CUB HRS FLIR LLL OA SAIC MANT CACI EGL BAH LDOS KTOS KEYW VEC ICFI VSEC NCIT Average: 11.0x Median: 10.5x Large Cap Aerospace Index Mid Cap Aerospace Index Small Cap Aerospace Index Average: 11.1x Average: 11.0x Average: 11.0x 14.7x 13.8x 11.0x 10.8x 10.5x 10.3x 6.8x AME TDG UTX BA COL TXT SPR Note: Multiples based on 2017 estimated EBITDA Source: Public Filings, S&P Capital IQ 16.7x 11.6x 11.1x 10.9x 10.1x 10.1x 6.3x HEI HXL CW OA MOG.A ESL TGI 20.8x 11.0x 9.9x 9.4x 9.0x 8.6x 8.2x AVAV WAIR OA ATRO AIR I DGI 14 14

15 Capital Markets: Stock Performance Defense and Government Services Performance Last 52-Week Performance Kratos 52.6% Kratos 190.2% Vectrus 44.6% Boeing 52.5% NCI 40.2% NCI 51.1% ManTech 19.5% General Dynamics 40.2% ICF 14.0% CACI 37.8% Boeing 11.8% Harris 32.1% VSE 10.2% VSE 32.0% Northrop Grumman 7.9% Teledyne 29.1% CACI 6.6% Engility 28.6% Raytheon 5.9% Raytheon 19.8% General Dynamics 5.8% SAIC 19.3% Lockheed Martin 3.7% Northrop Grumman 15.7% S&P % Orbital ATK 15.6% L-3 1.1% ICF 15.5% Leidos 1.1% Cubic 15.3% Teledyne 0.9% S&P % Orbital ATK 0.4% L % KEYW (1.0%) FLIR 11.6% Engility (1.9%) Lockheed Martin 11.3% Harris (2.0%) Booz 10.9% FLIR (4.5%) Vectrus 10.7% SAIC (6.7%) ManTech 8.8% Booz Cubic (8.1%) (12.3%) Leidos KEYW (12.6%) 6.2% (50%) (25%) 0% 25% 50% (50%) 0% 50% 100% 150% 200% Defense Prime Index Defense Systems Index Diversified Government Services Index Middle Market Government Services Index S&P 500 Index Source: Public Filings, S&P Capital IQ 15 15

16 Capital Markets: Stock Performance Aerospace Performance Last 52-Week Performance AeroVironment Triumph TransDigm Rolls-Royce Bombardier Safran Ametek Boeing Esterline Leonardo UTC Rockwell Collins Meggitt Moog Thales AAR HEICO S&P 500 DigitalGlobe Airbus Group Curtiss-Wright Orbital ATK Spirit AeroSystems Textron Hexcel Astronics GenCorp Wesco Aircraft Holdings Embraer Intelsat (1.0%) (3.2%) (4.0%) (4.1%) (4.8%) (13.0%) (26.3%) Source: Public Filings, S&P Capital IQ 36.3% 22.7% 22.1% 18.2% 15.7% 14.6% 12.0% 11.8% 10.2% 9.5% 3.0% 8.2% 7.1% 6.5% 3.9% 3.4% 3.0% 2.6% 1.7% 0.9% 0.6% 0.4% 0.0% (50%) (30%) (10%) 10% 30% 50% Leonardo Esterline Boeing DigitalGlobe AAR Airbus Group AeroVironment Spirit AeroSystems Moog HEICO Safran Ametek Textron Hexcel Rolls-Royce Rockwell Collins Thales Bombardier UTC Intelsat Meggitt Orbital ATK S&P 500 GenCorp Curtiss-Wright Astronics TransDigm Triumph Embraer Wesco Aircraft Holdings (11.4%) (14.3%) (20.0%) Large Cap Aerospace Mid Cap Aerospace Small Cap Aerospace International Aerospace S&P % 53.6% 52.5% 52.1% 49.2% 39.9% 36.6% 35.1% 34.3% 34.3% 31.4% 30.5% 29.5% 26.7% 25.2% 24.5% 24.0% 21.6% 18.9% 18.6% 17.1% 15.6% 15.2% 14.9% 9.2% 5.1% 2.3% (50%) (25%) 0% 25% 50% 75% 16 16

17 Short Interest Aerospace, Defense and Gov. Services 4.5% 4.0% 3.5% 3.0% 2.5% 2.6% 2.0% 1.5% 1.0% 1.0% Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Defense and Government Services Aerospace Short Interest as of June 30, 2017 Defense and Government Services 2.0% 0.8% 0.8% 1.0% 0.8% 1.3% 1.4% 0.6% 2.6% 0.6% 3.4% 0.6% 20.5% 9.2% 0.3% 0.7% 1.0% 1.0% 5.5% 0.7% 1.7% 2.0% 2.2% Aerospace 2.3% 3.8% 2.0% 1.4% 1.5% 17.1% 0.9% 1.7% 4.5% 2.6% 2.5% 4.1% 0.5% 4.4% 13.9% 2.6% 10.0% 1.1% 3.9% 4.7% 1.0% Source: Public Filings, S&P Capital IQ 17 17

18 Dry Powder: Defense and Gov. Services ($ millions) Defense Prime Index 3x LTM EBITDA $26,766.0 $14,607.0 $18,141.0 $11,229.0 $11,463.0 Less LT Debt 10, , , , ,337.0 Plus Cash 8, , , , ,186.0 Dry Powder $24,898.0 $12,886.0 $6,081.0 $5,572.0 $8,312.0 Middle Market Defense & Government Services Index 3x LTM EBITDA $1,872.0 $220.1 $1,078.4 $4,737.0 $3,750.0 $1,116.3 Less LT Debt 1, , , ,313.1 Plus Cash Dry Powder $534.0 ($62.6) $966.1 $826.0 $640.0 ($127.1) Middle Market Defense & Government Services Index 3x LTM EBITDA $1,642.8 $1,130.6 $576.0 $2,337.0 $375.5 $954.0 Less LT Debt 1, , , , ,040.0 Plus Cash Dry Powder $196.9 ($99.9) ($436.2) ($729.0) $467.1 $121.0 Middle Market Defense & Government Services Index 3x LTM EBITDA $338.0 $56.6 $67.2 $84.7 $141.3 $234.5 Less LT Debt Plus Cash Dry Powder $70.3 $42.2 ($228.7) $84.6 $114.7 ($2.7) Source: Public Filings, S&P Capital IQ 18 18

19 Dry Powder: Aerospace ($ millions) Large Cap Aerospace Index 3x LTM EBITDA $3,064.3 $26,766.0 $3,711.0 $4,581.0 $4,682.7 $30,333.0 Less LT Debt 2, , , , , ,582.0 Plus Cash , ,156.0 Dry Powder $1,220.0 $24,157.0 $1,783.0 $1,324.0 ($5,467.0) $12,907.0 Mid Cap Aerospace Index 3x LTM EBITDA $1,195.5 $1,152.0 $945.9 $1,058.5 $1,351.8 $994.0 $2,746.8 $1,321.3 Less LT Debt , , ,196.3 Plus Cash Dry Powder $502.6 ($23.7) $421.0 $634.3 $592.7 $342.6 $2,328.3 $194.6 Small Cap Aerospace Index 3x LTM EBITDA $392.4 $65.5 $293.1 $477.9 $4,812.5 $1,872.0 $499.0 Less LT Debt , , Plus Cash Dry Powder $231.8 $145.0 $162.4 $235.2 ($9,031.2) $534.0 ($309.7) Source: Public Filings, S&P Capital IQ 19 19

20 About The McLean Group The McLean Group is an industry-focused investment bank with deep expertise in mergers and acquisitions and business valuations Founded in 1997 The McLean Group Overview Leading middle market M&A advisor - Principals have closed more than 70 middle market transactions since 2010 with an aggregate value of more than $3 billion across the industry groups Extensive domain and transactional expertise delivered through dedicated industry-focused teams One of the largest valuation practices in the mid-atlantic region, outside the Big 4 accounting firms Investment Banking Business Valuation Sell Side M&A Advisory Buy Side M&A Support Corporate Divestitures Debt & Equity Recapitalizations Management & Leveraged Buyouts Employee Stock Ownership Plans (ESOPs) Equity Incentive Plans and ESOPs Financial Reporting Tax Compliance Transaction Opinions Transaction Advisory Litigation Support 20

21 About The McLean Group Aerospace, Defense & Government Practice The McLean Group s Aerospace, Defense & Government (ADG) industry group is one of the largest, most experienced, and most capable investment banking teams focused exclusively on the middle market defense and government services industry Deep Government Market Expertise Intelligence Community Cyber Security Products & Services C4ISR Communication Technology & Services Defense Electronics Healthcare IT, Software & Consulting Services Logistics & Training Technical & Professional Services Discriminators One of the largest ADG teams in the country 15 bankers who cover the sector Leadership team averages 15 years of exclusive focus on the sector Longstanding relationships with virtually every strategic and financial buyer in the sector 69 closed transactions in the defense and government services sector since 2010 Senior level attention throughout engagement As an independent investment bank, we avoid potential conflicts of interest and are able to provide honest advice to best support our clients 21 21

22 The McLean Group 7918 Jones Branch Drive Suite 750 McLean, VA Aerospace, Defense & Government Services Team Aerospace, Defense & Government M&A Practice Joe Golden Principal Cameron Hamilton Principal Mitch Martin Principal Valuation Practice Andy Smith Principal Greg Woodford Senior Managing Director Greg Nossaman Managing Director Kathleen Crow Managing Director Ryan Berry Principal John Stack Managing Director Harry Ward Director 2 22