Dear Friends,
We had an extremely busy quarter at KAL Capital both in terms of transaction activity as well as changes at the firm.
On the transaction front, we were pleased to announce three transactions:
Hypergiant a provider of AI-enabled, cloud-based command and control services has been acquired by Forward Slope.
Stack Metallurgical and Lake City Heat Treat, both providers of heat treating and Hot Isostatic Pressing services, have signed an agreement to be acquired by Bodycote plc for $145mm.
Cyclone Manufacturing, a provider of machining and fabrication services for the aerospace industry has signed an agreement to be acquired by Mubea.
Each of these transactions are covered in greater detail in the pages to follow, but suffice to say, we are extremely proud to be associated with each of these deals. From our perspective, the M&A market has shown continued, gradual improvement over the course of 2023. The most positive tailwinds are around debt financing as the availability of credit continues to increase, albeit at increased all-in-pricing. As usual, we will add our usual caveat that the M&A activity within the A&D industry sees less volatility than other sectors. Case in point, we expect A&D transaction activity to finish the year down 15 – 25% for the full-year 2023. This would mark a significant out performance compared to the broader market.
Within our sub-sectors, aerospace continues to be plagued by ongoing production ramp challenges, particularly for the Boeing and Pratt & Whitney supply-chains as quality issues continue to emerge. Unfortunately, these portions of the supply-chain continue to be in the uncomfortable position of strong demand signals from end-users that can not be met due to underlying chaos within the industrial base.
For the defense sub-sector, we are now witness to another devasting conflict, now in Israel. In addition to the ongoing war in Ukraine, this conflict will serve as a critical test to see if the US will be funding national security requirements despite a politically divisive environment within the US House.
In case you missed it, we are thrilled to announce the re-hiring of Trevor McKinnon to lead a new addition to KAL’s core service offering. The new practice area will focus on advising businesses developing emerging critical technologies within the DoD ecosystem and will broaden our service offering to include growth capital raising. We are beyond excited!
Sincerely,
Trevor Bohn & Ryan Murphy