Aerospace, Defense & Government Services

Despite uncertainty in some parts of the market in 2023, many Harris Williams clients in aerospace, defense, and government services generated strong attention from investors, highlighting the continued attractiveness of high-quality, differentiated businesses with defensible market positions and resilient revenue.

Looking ahead, we're encouraged by moderating inflation, a resilient labor market, a positive stock market trajectory, healthy company earnings, and stable interest rates. At the same time, we are closely watching macroeconomic conditions and potential market disruptions, including the upcoming U.S. election and ongoing global geopolitical conflicts. Read more about the trends impacting the overall market >

Investment Opportunities Continue in 2024

In the aerospace, defense, and government services industry, investors are aggressively pursuing quality platforms with strong visibility into future earnings, supported by resilient demand for unique, mission-critical offerings, and highly credible program- or platform-specific growth forecasts. Trends to watch in 2024 include sustained interest in proprietary government and defense technology, continued infrastructure investment within the aviation ecosystem, and commercial aerospace regaining its footing across both OE and aftermarket segments after years of disruption.

Sustained Interest in Proprietary Government and Defense Technology

We continue to see strong and growing interest in the government technology sector, in which world-class technology and innovative new business models are enabling the public sector to deliver its services better, in new ways, and more cost-effectively.   

For instance, we teamed with the Harris Williams Technology Group to advise Advent International on the divestiture of the Forensic Technology division from Ultra Electronics. Forensic Technology offers a comprehensive suite of digital ballistic intelligence software, data, and integrated systems empowering public safety organizations to more accurately acquire, analyze, and correlate gun crime evidence. The company was acquired by LeadsOnline, a portfolio company of TA Associates. The combination of Forensic Technology and LeadsOnline will help law enforcement agencies to better link evidence across jurisdictions through a single source, improving collaboration and supporting safer communities.

Against the backdrop of a complex global security environment in which many countries are making major strategic investments into modernization and force sustainment, defense technology and electronics continue to attract significant investor interest. One example of this is the divestiture of Communications and Power Industries' Electron Device Business (EDB), a leading designer and manufacturer of proprietary high-power microwave components. EDB components enable many of the most advanced systems operated by armed forces in the U.S. and globally. Amidst strong buyer interest, the division agreed to be acquired by TransDigm Group, a strategic buyer with a focus on differentiated companies with significant recurring revenue and growth opportunities in the aftermarket.

More broadly, similar to our experience in 2023, we expect additional divestiture activity in 2024. As larger platforms optimize their portfolios, they are providing buyers with actionable and compelling opportunities to acquire great businesses, add focused capabilities, and unlock growth potential.

Continued Infrastructure Investment Within the Aviation Ecosystem

Modern Aviation, a high-growth FBO investment platform, is a recent example of the sustained interest of infrastructure investors in an expanding range of aviation businesses. With a national network of FBO locations and diversified customer base, Modern attracted a majority investment from Apollo-managed infrastructure funds. Reflecting the appeal of investment opportunities in business aviation and the steady and predictable revenue generated by Modern Aviation, the company’s original investor, Tiger Infrastructure, is retaining a significant stake in the business. We expect to see interest in the FBO space, and broader private aviation ecosystem, to persist for years to come.

Looking Ahead

Within commercial aerospace, we’re starting to see a resurgence of activity among complex connectivity subsystem and components suppliers to major aircraft OEMs like Boeing and Airbus, which are now resuming their ramp-up of commercial aircraft production. Overall, there is much more optimism across the commercial aerospace supply chain for both production-oriented and aftermarket-oriented businesses after the industry faced years of disruption. And with more aircraft flying in 2024 to support largely recovered passenger demand, the need for nondiscretionary, recurring aftermarket services will continue to grow. 

Broad-based interest in dual-use technology, in which innovations developed in commercial sectors find new applications in defense sectors and vice versa, is another investment theme that we expect to continue in the year ahead.  Starlink is a good example of this trend, as the company’s space-based commercial high-speed internet capabilities are now transforming how militaries communicate and operate.  We expect to see this dynamic further play out in 2024 and beyond, particularly in areas like communications and connectivity, autonomy, advanced analytics, and machine learning. 

The privatization of space—most visibly exemplified by SpaceX—also continues to create exciting new opportunities for growth companies and investors, from high-speed internet access in remote locations to missile defense to tracking shipping vessels. The difference today versus a few years ago is the notable increase in large-scale and mid-sized M&A that now complements the steady and sustained run of venture capital investment. 

Please contact our senior professionals to discuss M&A opportunities across the aerospace, defense, and government services industry.