Dear Friends,
We hope you’re doing well as we enter the final quarter of 2024. The Aerospace & Defense industry has experienced several significant developments over the past few months, and we’re excited to share some key highlights.
The Boeing strike has caused considerable delays across the supply chain, particularly impacting the already troubled 737 program. As Boeing recovers, the industry is watching closely to see how quickly production will return to normal and alleviate pressure on tier 1 and tier 2 suppliers dependent on ramping deliveries. The resolution of this strike will be a critical factor in the pace of industry recovery.
In the M&A space, Q3 2024 saw several major transactions reshaping the A&D landscape. ITT’s $475 million acquisition of kSARIA expanded its capabilities in military fiber optic connectivity, while Honeywell’s $1.9 billion acquisition of CAES boosted its portfolio in electronic warfare. Similarly, KBR’s $737 million acquisition of LinQuest enhanced its standing in defense intelligence and reconnaissance technologies. The middle-market sector also remains robust. Noteworthy transactions include Loar Group’s $385 million acquisition of Applied Avionics and Parsons’ $200 million acquisition of BlackSignal. These deals reflect growing interest in niche technologies like unmanned systems and avionics, which are critical for modern defense strategies and will shape the future growth in the sector.
Looking ahead, the upcoming U.S. presidential election is poised to have significant implications for defense policy. President Biden’s administration has directed substantial funds toward emerging technologies and R&D, but the focus on areas like cybersecurity and AI has sometimes sidelined traditional defense procurement programs, raising concerns about readiness. This approach has led to some concerns about readiness in key military areas, with many defense contractors facing delays and uncertainty surrounding new orders for large equipment programs. Vice President Harris has further supported reducing military expenditures in favor of domestic social programs. Her progressive stance on military engagement could shift funding priorities even further away from traditional defense spending, potentially leading to cuts in major procurement programs in favor of more technology-driven projects.
In contrast, a Trump administration would likely focus on ramping up procurement spending, particularly for traditional defense platforms like fighter jets, missile defense systems, and shipbuilding. A renewed focus on large-scale defense acquisitions would create significant opportunities for companies involved in manufacturing and supplying these critical assets.
We anticipate a dynamic close to 2024 and appreciate your continued partnership as we navigate these evolving times in the A&D industry.
Warm Regards,
Trevor Bohn & Ryan Murphy