aerospace, defense &...

Strategic Market Insights – Q1 2017 Report

Aerospace, Defense & Security

www.g2cap.com 2

G2 Capital Advisors is pleased to present its Aerospace, Defense & Security industry update for Q1 2017,

providing commentary and analysis on M&A and market trends within the Aerospace, Defense & Security

industry. We hope you find this report helpful and encourage you to contact us directly if you would like to

discuss our perspective on the current market environment, trends, or our relevant industry experience.

G2 offers clients an operational, experience-based approach within

each of its practice sectors.

G2 OverviewInvestment Banking and Restructuring Advisory

G2 is focused in four sectors; each practice group headed by a leader with 20+ years of C-level operating

experience. G2’s managing directors have navigated all stages of the corporate lifecycle, from growth to

maturity, and apply that experience to provide advisory services to our clients.

Sector-Focused; Experience-Based

Transportation &

Logistics / Supply Chain

Industrials /

Manufacturing

Technology /

Business Services

Aerospace & Defense /

Security

Led by Ron Lentz Led by Jack Shields Led by Matt Konkle Led by Bob Kinder

▪ Freight Forwarding

▪ Trucking / Final Mile

▪ Warehousing / Distribution

▪ Third Party Logistics (3PL)

▪ e-Commerce Fulfillment

▪ Manufacturing / Distribution

▪ Flooring

▪ Plastics / Packaging

▪ Consumer Products

▪ Metals

▪ Tech-enabled Services

▪ BPO

▪ Managed Services

▪ Internet & Digital Media

▪ Business Services

▪ Cyber Security

▪ Defense Robotics

▪ UAV, C4ISR, Hardware

▪ Aerospace Electronics

▪ Aerospace Components

THIRTY-FIVE professionals

across SIX offices

FOUR Sector Practice Groups

Transportation & Logistics / Supply Chain

Industrials / Manufacturing

Technology / Business Services

Aerospace & Defense / Security

FIVE Service Offerings

Securities

Sell-Side

Buy-Side

Operational

Restructuring

Financial

Restructuring

G2 Overview

www.g2cap.com 3

G2 Insights

Market Update

The U.S. Defense Industry remains optimistic about the administration’s “historic” military build-up with

the increase of $52.8 billion in the DoD base budget for FY2018. Given the current situation of North

Korea and the ongoing operations in Syria, Iraq and Afghanistan, we are taking a deeper look into recent

trends in the Overseas Contingency Operations (OCO) funding. Since 2001, approximately $1.7 trillion

has been spent under OCO (and its predecessor, the Global War on Terror Funds), representing 18% of

total DoD funding during this period.

The OCO budget request for FY2017 (revised, May 22, 2017 release reported amounts) and FY2018

(May 22, 2017 release) is approximately $65 billion, which is allocated for defense related activities.

▪ $11.6 billion for additional resources needed to maintain approximately 8,400 troops in

Afghanistan (recently announced to be increasing to 11,400 troops) and to fund additional troops

and requirements in Iraq / Syria.

▪ Other Host Nation Support by the State Department include to ‘respond to, recover from, or

prevent crises abroad, including armed conflict, as well as human-caused and natural disasters’

$B

N

Source: DOD National Defense Budget Estimates for FY2017 (table 2-1) and DOD Overview: Overseas Contingency Operations Budget Amendment FY2017

* Approximate OCO funding budget for 2018 from recently released budget

$23 $17

$73

$91

$76

$116

$166

$187

$146

$162 $159

$115

$82 $85

$63$59

$65

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

OCO/GWOT Budget Authority by Military Department

Air Force Defense-Wide Army Navy

$65

www.g2cap.com 4

G2 Case Study


THE BUSINESS AND ASSETS OF AEROSPACE

HOLDINGS, INC. HAVE BEEN ACQUIRED BY HARLOW

AEROSTRUCTURES LLC

CLIENT

Aerospace Holdings, Inc. (“GroupAero”) is a critical provider of advanced engineering, design and

manufacturing services to the commercial and defense aerospace markets. GroupAero consists of three

companies, NC Dynamics located in Long Beach California; Valley Tool and Manufacturing located in

Orange, Connecticut and NCDM, a maquiladora located in Mexicali, Mexico. These three operating

companies have been providing aerospace components and assemblies, servicing military and civilian fixed

wing and helicopter markets for over 30 years to companies located in the USA, Europe, and Asia.

SITUATION

Facing significant liquidity issues and a default with its secured and unsecured creditors, GroupAero sought

to restructure its capital structure, raise additional liquidity, or execute a full sale starting in late 2016.

GroupAero filed chapter 11 on March 28, 2017.

ENGAGEMENT

G2 served as the financial advisor to GroupAero pre-petition, providing M&A advisory services and served as

GroupAero’s investment banker post-petition during the initial 363 process and private sale proceedings.

OUTCOME

The transaction was successfully executed via a complex, multi-stage process that included Harlow

Aerostructures, LLC (“Harlow”) pursuing an acquisition of substantially all of GroupAero’s assets by credit

bidding their ownership of GroupAero’s first lien debt within the context of a 363 sales process during the

initial stages of the chapter 11. The proceedings were then converted to a private sale. "This transaction will

reposition and strengthen the business for future growth and continued high customer service. G2 played a

critical role in developing several transaction options as our financial advisor,” said Steve Woodhouse,

President, NC Dynamics, Inc.

www.g2cap.com 5

Company Title Role

Senior AdvisorDeveloped the training requirements for the 130,000+,

multi-national team in Afghanistan.

Senior Advisor

Directed and led a $72M, national security project in

Afghanistan. Won $250M contract away from a seven-

year incumbent.

PresidentEffected $15M+ YoY growth for a startup through joint

ventures and alliances.

Expert AnalystRegular expert analyst on national security issues for

major news outlets.

Published

Author

Published author in Boston Globe, New York Daily

News, Atlantic, the Harvard Gazette, and the Harvard

Kennedy School Review.

Aerospace, Defense & SecurityBob Kinder, Managing Director

G2 Capital Advisor’s Aerospace, Defense & Security industry practice leader, Bob Kinder, a retired military

officer with over 20 years of service in both the U.S. Air Force and Army special operations communities,

specializes in executing complex M&A transactions, restructurings, and strategic planning initiatives.

Alex Koblansky brings 10+ years of M&A transaction experience to G2’s Aerospace, Defense & Security

practice group. Prior to joining G2 Capital Advisors, Alex was Vice President in the Aerospace, Defense &

Government Services Industry Group at Stifel, Nicolaus & Company, Incorporated where he supervised and

led on all aspects of transaction execution and due diligence.

Alex Koblansky, Vice President


Bob KinderPractice Leader

Aerospace, Defense &

Security

Company Title Role

Vice President

Aerospace, Defense and Government Services

industry expertise specializing in mergers,

acquisitions, and divestures transactions as well as

raising equity and debt in the public and private capital

markets.

AssociateOriginated structured and securitized lending solutions

for clients.

Analyst

Liaison representative between the Mayor and

international community (City of Charlotte, North

Carolina).

Alex KoblanskyVice President

Aerospace, Defense &

Security

www.g2cap.com 6

Aerospace, Defense & SecurityM&A Activity – Middle Market

M&A transaction multiples are the median North American M&A activity independent of target / acquirer industry and enterprise

value. The dataset has been restricted to multiples between 0.0x and 30.0x EBITDA; sourced through Pitchbook’s 2017 Q1 Report.

The U.S. Middle Market as shown in this chart has been defined as companies with an enterprise value between $25MM and

$1,000MM, and headquartered in the United States.

M&A Transaction Multiples

U.S. Middle Market Private Equity Activity

Data sourced through PitchBook 2017 Q1 Report

Total deal activity has remained steady since Q2 2013; overall deal multiples remain strong. Though

there has been some pullback in M&A, debt remains a strong driver of transaction valuations.

6.1

x

4.1

x

4.9

x

5.7

x

4.9

x

5.2

x

4.0

x 5.8

x

4.7

x

5.7

x

5.9

x

6.2

x

4.9

x

4.8

x

5.8

x

5.4

x

5.9

x

4.3

x

2.6

x

3.8

x 3.6

x

3.7

x

3.4

x

4.2

x

4.0

x

4.7

x 4.3

x

4.8

x

3.3

x

5.0

x

4.8

x

5.7

x

4.7

x

3.9

x

10.4x

6.7x

8.8x9.3x

8.6x 8.6x8.2x

9.8x9.3x

10.0x10.7x

9.5x9.9x

9.6x

11.5x

10.1x9.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2013 2014 2015 2016 2017

Multip

les o

f E

BIT

DA

Debt/EBITDA Equity/EBITDA Valuation/EBITDA

$71

$59

$81

$89

$115

$104

$115

$113

$94

$102

$100

$104

$89

$96

$85

$87

$91

$364$333

$505 $507

$595

$518

$566

$507 $502$537

$571 $570 $559 $553

$469

$541

$422

0

100

200

300

400

500

600

700

$0

$20

$40

$60

$80

$100

$120

$140

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2013 2014 2015 2016 2017*

Deal Value ($B) # of Deals Closed

Deal V

alu

e (

$B

N)

To

tal D

eal C

ount

www.g2cap.com 7

Selected Industry Deals Q1 2017



Key Trading Statistics

Sector Summary in Millions USD (converted where necessary)

Data sourced from S&P Capital IQ on Friday March 31, 2017

FY 20171 LTM2

SectorNumber of

Companies

Median Enterprise

Value (MM)

Median

Revenue

Growth

Median

EBITDA

Growth

EV /

Revenue

EV /

EBITDA

Aerospace Equipment & Structure 11 5,792 3.4% 12.5% 2.6x 11.6x

Aircraft OEM 6 51,297 4.7% 43.0% 1.2x 18.4x

Defense Prime Contractors 9 47,045 5.4% 26.8% 1.5x 14.6x

Defense Technologies 13 4,115 7.0% 17.5% 2.1x 15.0x

Government Services 10 3,088 5.6% 9.4% 1.0x 12.3x

Diversified Industrial (Aerospace) 10 20,270 4.1% 8.5% 2.1x 13.8x

MRO 3 1,259 3.3% 25.7% 1.0x 10.0x

1 Estimated – 2017 Fiscal Year2 LTM Multiples as at Friday, March 31, 2017

Several notable transactions have already been completed or announced in the Aerospace, Defense

& Security industry through 2017 Q1. G2 has outlined select transactions below, followed by a more

comprehensive list on the following tables.

▪ LMI Aerospace, Inc. to be acquired by Sonaca Group (Pending) – LMI Aerospace Inc. is a leading

supplier of structural assemblies, kits and components and provider of engineering services to the

commercial, business and regional, and military aerospace markets. Sonaca Group is a global

Belgian company active in the development, manufacturing and assembly of advanced structures

for civil, military and space markets. The transaction represents a 52% premium over LMI’s closing

price on Feb. 16, valued around $430MM with an EBITDA multiple of 12.5x.

▪ Sotera Defense Solutions acquired by The KeyW Holding Corporation (Apr 2017) – Sotera Defense

Solutions, Inc. (Sotera) is an agile, mid-size national security technology company that delivers

innovative systems, solutions and services. KeyW is a total solutions provider for the Intelligence,

Cyber and Counterterrorism Communities' toughest challenges. Together, KeyW and Sotera will

deliver an advanced portfolio of engineering and technology solutions, including cyber, cloud and

data analytics. The transaction is an all cash transaction of approximately $235MM.

▪ Harris Corporation’s Government IT Services Business acquired by Veritas Capital (Jan 2017) –

Harris Corporation is a leading technology innovator, solving customers’ toughest mission-critical

challenges Veritas Capital, a leading private equity investment firm, will acquire Harris’ government

IT services business for $690 million in cash. Proceeds from the transaction will be used to support

the company’s capital allocation strategy, including pension pre-funding and share.

www.g2cap.com 8



Data sourced from S&P Capital IQ on Friday, March 31, 2017

Recent Deal Activity – Pending & Closed

Date Closed Target Acquirer / InvestorImplied Enterprise

Value (MM)EV / EBITDA EV / Revenue

Pending Zodiac Aerospace Safran SA $10,373.6 35.4x 1.8x

Pending Nova-Tech Engineering, Inc.Advanced Integration

Technology, LP- - -

Pending LMI Aerospace, Inc. Sonaca SA $429.8 12.5x 1.2x

Mar-17 TP Aerospace Solutions Aps CataCap Management Aps - - -

Feb-17 ETI Tech, Inc.Soaring Pine Capital

Management- - -

Feb-17 Elimco Sistemas, S.L.GHENOVA Ingeniería,

S.L.U.- - -

Feb-17 Quatro Composites, LLC AIM Aerospace, Inc. - - -

Jan-17 AMK Welding, Inc. Meyer Tool, Inc. $6.0 - -



Pending Mega Machine Shop, Inc. ZEV Technologies Inc. - - -

Apr-17 Sotera Defense Solutions The KEYW Corporation $235.0 11.3x 1.0x

Feb-17 Ibis Tek, LLC Undisclosed - - -

Feb-17Aerojet Rocketdyne Coleman

Aerospace, Inc.Aerojet Rocketdyne, Inc. $15.0 - -

Jan-17Aegis Engineering Limited

and LBA International LimitedSafariland, LLC - - -

Jan-17 Sintel Group Inc. VOR Technology, LLC - - -

Dec-16 Aviation & Missile Solutions Dynetics, Inc. - - -

Aerospace Equipment & Structure

Defense Prime Contractors and Defense Technologies

MRO



Pending REVIMA SASArgos Soditic; Euroknights

VII- - -

Mar-17 Starport USA, Inc Constant Aviation, LLC - - -

Mar-17 Röder Präzision GmbH Undisclosed - - -

Jan-17Key Air, LLC and CIRRUS

Flight Operations, Inc.Lynx FBO Network - - -

Government Services



PendingHarris Corporation,

Government IT Services

Business

Veritas Capital $690.0 - 0.7x

www.g2cap.com 9

Public Trading Metrics – Aerospace Equipment & Structure


IndustryEnterprise

ValueMarket Cap Cash

LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 9,428 7,712 431 4,020 875 18.9% 1,869 2.2x 2.6x 11.6x

Median 5,792 4,952 215 2,433 451 20.8% 1,000 1.7x 2.4x 11.3x

Company Ticker

Size (Millions USD)EBITDA

Margin

Leverage Valuation

Enterprise


LTM

RevenueLTM EBITDA LT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Astronics

CorporationNasdaqGS:ATRO 1,055 925 18 633 99 15.6% 145 1.5x 1.7x 10.7x

HEICO

CorporationNYSE:HEI 5,938 5,380 46 1,413 348 24.6% 414 1.2x 4.2x 17.1x

Héroux-Devtek

Inc.TSX:HRX 404 315 14 300 44 14.6% 97 2.2x 1.3x 9.2x

Hexcel

CorporationNYSE:HXL 5,605 4,952 82 1,985 451 22.7% 837 1.9x 2.8x 12.4x

Meggitt PLC LSE:MGGT 5,792 4,318 215 2,460 511 20.8% 1,445 2.8x 2.4x 11.3x

Moog Inc. NYSE:MOG.A 3,091 2,416 332 2,433 330 13.5% 1,000 3.0x 1.3x 9.4x

Rockwell

Collins, Inc.NYSE:COL 14,657 12,683 281 5,314 1,237 23.3% 1,354 1.1x 2.8x 11.8x

Safran SA ENXTPA:SAF 33,538 31,131 2,033 17,546 3,849 21.9% 3,089 0.8x 1.9x 8.7x

Spirit

AeroSystems

Holdings, Inc.

NYSE:SPR 7,290 6,900 672 6,805 916 13.5% 1,051 1.1x 1.1x 8.0x

TransDigm

Group

Incorporated

NYSE:TDG 21,521 11,634 972 3,284 1,511 46.0% 10,567 7.0x 6.6x 14.2x

Woodward, Inc. NasdaqGS:WWD 4,812 4,173 79 2,042 328 16.1% 562 1.7x 2.4x 14.7x


Charts show average daily multiples for each year


12.9x

9.0x

6.9x

9.1x10.0x10.3x

13.5x13.4x

12.0x11.2x 11.6x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

EV

/ E

BIT

DA

S&P 500

2.2x

1.7x

1.4x

1.9x

2.1x2.0x

2.2x

2.6x 2.6x2.5x

2.6x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

www.g2cap.com 10

Public Trading Metrics – Aircraft OEM


IndustryEnterprise


LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 52,685 48,830 4,259 43,322 3,534 7.7% 8,963 6.9x 1.2x 18.4x

Median 51,297 50,222 2,552 36,378 2,698 8.0% 8,841 3.9x 1.0x 14.2x

Company Ticker


Margin

Leverage Valuation

Enterprise


LTM


LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Airbus SE ENXTPA:AIR 56,538 58,917 9,822 72,055 1,653 2.3% 8,950 5.4x 0.8x 34.2x

Bombardier Inc. TSX:BBD.B 10,602 3,395 2,887 16,001 449 2.8% 8,733 19.4x 0.7x 23.6x

Embraer S.A. BOVESPA:EMBR3 5,290 4,043 1,034 6,204 392 6.3% 4,326 11.0x 0.9x 13.5x

Lockheed

Martin

Corporation

NYSE:LMT 90,096 77,556 2,216 47,937 6,047 12.6% 14,276 2.4x 1.9x 14.9x

Northrop

Grumman

Corporation

NYSE:NOC 46,056 41,527 1,403 24,819 3,743 15.1% 7,060 1.9x 1.9x 12.3x

The Boeing

CompanyNYSE:BA 107,528 107,545 8,190 92,915 8,922 9.6% 10,432 1.2x 1.2x 12.1x




13.2x

7.0x

5.3x

8.3x

7.3x 7.3x

8.4x

9.2x9.8x

11.6x

12.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

EV

/ E

BIT

DA

S&P 500

1.0x

0.7x

0.5x0.6x 0.6x 0.6x

0.8x

1.0x1.1x 1.1x 1.1x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

www.g2cap.com 11

Public Trading Metrics – Defense Prime Contractors


IndustryEnterprise


LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 51,257 49,146 3,901 37,539 3,748 11.3% 6,366 1.9x 1.5x 14.6x

Median 47,045 44,664 3,303 24,819 3,687 12.6% 5,464 1.4x 1.4x 12.3x

Company Ticker


Margin

Leverage Valuation

Enterprise


LTM


LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Airbus SE ENXTPA:AIR 56,538 58,917 9,822 72,055 1,653 2.3% 8,950 5.4x 0.8x 34.2x

BAE Systems

plcLSE:BA. 27,629 25,554 3,419 21,965 2,236 10.2% 5,464 2.4x 1.3x 12.4x

General

Dynamics

Corporation

NYSE:GD 58,345 56,791 2,334 31,353 4,763 15.2% 2,988 0.6x 1.9x 12.2x

Huntington

Ingalls

Industries, Inc.

NYSE:HII 9,823 9,265 608 7,029 1,008 14.3% 1,280 1.3x 1.4x 9.7x

Lockheed

Martin

Corporation

NYSE:LMT 90,096 77,556 2,216 47,937 6,047 12.6% 14,276 2.4x 1.9x 14.9x

Northrop

Grumman

Corporation

NYSE:NOC 46,056 41,527 1,403 24,819 3,743 15.1% 7,060 1.9x 1.9x 12.3x

Raytheon

CompanyNYSE:RTN 47,045 44,664 3,303 24,069 3,687 15.3% 5,335 1.4x 2.0x 12.8x

Thales S.A. ENXTPA:HO 18,257 20,498 3,818 15,713 1,672 10.6% 1,513 0.9x 1.2x 10.9x

The Boeing

CompanyNYSE:BA 107,528 107,545 8,190 92,915 8,922 9.6% 10,432 1.2x 1.2x 12.1x




1.0x

0.8x

0.6x 0.6x 0.6x 0.6x

0.8x

1.0x

1.2x1.3x

1.4x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

10.9x

6.9x

5.9x

8.3x

7.0x

5.7x

7.0x

8.5x9.2x

10.0x

11.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

EV

/ E

BIT

DA

S&P 500

www.g2cap.com 12

Public Trading Metrics – Defense Technologies


IndustryEnterprise


LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 5,256 4,350 192 2,804 454 11.9% 1,046 3.3x 2.1x 15.0x

Median 4,115 2,823 200 1,690 170 13.9% 452 2.3x 1.7x 12.7x

Company Ticker


Margin

Leverage Valuation

Enterprise


LTM


LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

AeroVironment,

Inc.NasdaqGS:AVAV 450 644 73 224 (7) -3.1% NA NA 2.0x NM

Chemring

Group plcLSE:CHG 781 671 77 583 81 13.9% 148 1.8x 1.3x 9.7x

Cobham plc LSE:COB 4,115 2,823 292 2,400 (667) -27.8% 1,487 -2.2x 1.7x NM

Cubic

CorporationNYSE:CUB 1,695 1,431 168 1,460 73 5.0% 200 2.7x 1.2x 23.1x

Elbit Systems

Ltd.TASE:ESLT 5,056 4,881 223 3,260 411 12.6% 172 0.4x 1.6x 12.3x

FLIR Systems,

Inc.NasdaqGS:FLIR 5,102 4,946 397 1,690 359 21.3% 495 1.4x 3.0x 14.2x

Harris

CorporationNYSE:HRS 17,889 13,849 302 7,366 1,579 21.4% 3,859 2.4x 2.4x 11.3x

Kratos Defense

& Security

Solutions, Inc.

NasdaqGS:KTOS 1,023 660 73 684 22 3.3% 369 16.5x 1.5x NM

L3

Technologies, NYSE:LLL 15,907 12,861 230 10,827 1,236 11.4% 3,326 2.7x 1.5x 12.9x

Mercury

Systems, Inc.NasdaqGS:MRCY 2,017 1,872 270 378 69 18.3% 176 2.5x 5.3x 29.2x

Orbital ATK,

Inc.NYSE:OA 7,173 5,640 200 4,455 631 14.2% 1,399 2.2x 1.6x 11.4x

Teledyne

Technologies

Incorporated

NYSE:TDY 4,974 4,454 99 2,150 360 16.8% 510 1.4x 2.3x 13.8x

Ultra

Electronics

Holdings plc

LSE:ULE 2,144 1,822 92 970 170 17.5% 409 2.4x 2.2x 12.6x




12.8x

11.3x

9.1x9.4x 9.0x

7.3x

9.8x

10.6x

14.0x 13.6x14.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

EV

/ E

BIT

DA

S&P 500

2.0x1.9x

1.5x1.5x 1.5x

1.3x

1.4x

1.7x 1.7x1.8x

1.9x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

www.g2cap.com 13

Public Trading Metrics – Government Services


IndustryEnterprise


LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 3,722 2,720 127 3,321 317 7.6% 1,335 3.8x 1.0x 12.3x

Median 3,088 2,102 106 3,185 263 8.8% 1,126 3.3x 1.0x 11.0x

Company Ticker


Margin

Leverage Valuation

Enterprise


LTM


LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Booz Allen

HamiltonNYSE:BAH 6,521 5,307 350 5,647 520 9.2% 1,485 2.9x 1.2x 12.5x

CACI

International

Inc

NYSE:CACI 4,155 2,861 54 4,331 377 8.7% 1,231 3.3x 1.0x 11.0x

CSRA Inc. NYSE:CSRA 7,440 4,777 162 5,029 746 14.8% 2,550 3.4x 1.5x 10.0x

Engility

Holdings, Inc.NYSE:EGL 2,096 1,064 25 2,039 192 9.4% 1,010 5.3x 1.0x 10.9x

Leidos

Holdings, NYSE:LDOS 10,619 7,696 206 8,311 779 9.4% 3,188 4.1x 1.3x 13.6x

ManTech

International

Corporation

NasdaqGS:MANT 1,277 1,342 92 1,629 125 7.7% NA NA 0.8x 10.2x

NCI, Inc. NasdaqGS:NCIT 203 204 2 318 28 8.9% NA NA 0.6x 7.2x

Science

Applications

International

Corporation

NYSE:SAIC 4,079 3,242 210 4,450 334 7.5% 1,022 3.1x 0.9x 12.2x

The KEYW

Holding

Corporation

NasdaqGS:KEYW 552 461 120 283 19 6.7% 134 7.1x 2.0x 29.2x

Vectrus, Inc. NYSE:VEC 280 244 54 1,170 47 4.0% 63 1.3x 0.2x 5.9x




11.2x

15.5x

12.3x

8.3x

6.6x 6.4x7.6x

10.6x 9.6x10.4x

11.9x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

EV

/ E

BIT

DA

S&P 5001.4x

1.3x

1.1x

1.4x

0.9x

0.5x0.6x

0.7x0.9x

1.0x1.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

www.g2cap.com 14

Public Trading Metrics – Diversified Industrial (Aerospace)


IndustryEnterprise


LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 71,958 55,025 2,969 28,922 4,475 14.2% 15,361 2.6x 2.1x 13.8x

Median 20,270 19,366 978 16,126 1,626 16.7% 4,558 2.1x 2.0x 12.8x

Company Ticker


Margin

Leverage Valuation

Enterprise


LTM


LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

AMETEK, Inc. NYSE:AME 14,063 12,439 570 3,903 1,021 26.2% 2,077 2.0x 3.6x 13.8x

Crane Co. NYSE:CR 4,696 4,449 505 2,761 473 17.1% 746 1.6x 1.7x 9.9x

Curtiss-Wright

CorporationNYSE:CW 4,456 4,044 273 2,129 399 18.7% 815 2.0x 2.1x 11.2x

Eaton

Corporation plcNYSE:ETN 40,843 33,260 222 19,782 3,207 16.2% 6,687 2.1x 2.1x 12.7x

General Electric

CompanyNYSE:GE 389,900 259,520 7,875 119,929 17,641 14.7% 99,674 5.7x 3.3x 22.1x

Honeywell

International

Inc.

NYSE:HON 101,096 94,991 7,710 39,272 7,823 19.9% 11,181 1.4x 2.6x 12.9x

Parker-Hannifin

CorporationNYSE:PH 22,403 21,370 820 11,490 1,665 14.5% 5,255 3.2x 1.9x 13.5x

Rolls-Royce

Holdings plcLSE:RR. 18,138 17,363 3,421 18,465 827 4.5% 3,861 4.7x 1.0x 21.9x

Textron Inc. NYSE:TXT 15,396 12,853 1,137 13,788 1,586 11.5% 2,414 1.5x 1.1x 9.7x

United

Technologies

Corporation

NYSE:UTX 108,587 89,957 7,156 57,702 10,111 17.5% 20,898 2.1x 1.9x 10.7x




12.0x

9.9x

9.1x

11.9x

10.9x10.9x

12.2x12.4x

11.3x11.9x

12.5x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

EV

/ E

BIT

DA S&P 500

1.9x

1.6x

1.3x

1.6x 1.7x 1.7x

2.0x2.1x

2.0x2.0x

2.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

www.g2cap.com 15

Public Trading Metrics – MRO


IndustryEnterprise


LTM

RevenueLTM EBITDA

EBITDA

MarginLT Debt

LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

Mean 1,290 901 22 1,299 125 8.5% 387 2.9x 1.0x 10.0x

Median 1,259 1,126 10 1,445 131 10.5% 194 2.5x 0.9x 9.6x

Company Ticker


Margin

Leverage Valuation

Enterprise


LTM


LT Debt /

EBITDA

EV / LTM

Revenue

EV / LTM

EBITDA

AAR Corp. NYSE:AIR 1,259 1,126 10 1,708 131 7.7% 169 1.3x 0.7x 9.6x

VSE

CorporationNasdaqGS:VSEC 677 441 0 745 78 10.5% 194 2.5x 0.9x 8.7x

Wesco Aircraft

Holdings, Inc.NYSE:WAIR 1,933 1,135 54 1,445 166 11.5% 799 4.8x 1.3x 11.6x




10.9x

6.5x

5.2x

6.0x

7.1x7.0x

8.1x

9.3x10.5x

14.4x

13.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

EV

/ E

BIT

DA

S&P 500

0.9x

0.6x0.4x

0.5x

1.1x 1.2x

1.3x1.4x

1.2x1.1x 1.1x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

EV

/ T

OT

AL

RE

VE

NU

E

S&P 500

www.g2cap.com 16

Trends

Last 5 Year EV / LTM EBITDA Trend by Industry


Data sourced through S&P Capital IQ on Friday, March 31, 2017

Economic Index Trends

The Aerospace and Defense Industry has outperformed the S&P 500 index over the last 5 years

Data sourced through S&P Capital IQ on Friday, March 31, 2017

-20

0

20

40

60

80

100

120

140

S&P 500 S&P 500 Aerospace & Defense

Ind

ex

0.0x

5.0x

10.0x

15.0x

20.0x

Q1 '12 Q3 '12 Q1 '13 Q3 '13 Q1 '14 Q3 '14 Q1 '15 Q3 '15 Q1 '16 Q3 '16 Q1 '17

EV

/ E

BIT

DA

^SPX Aerospace Equipment & Structure

Aircraft OEM Defense Prime Contractors

Defense Technologies Government Services

Diversified Industrial (Aerospace) MRO

www.g2cap.com 17

ReferenceContact & Glossary of Terms

For more information about G2, please visit: www.g2cap.com

Our corporate headquarters is located at: 535 Boylston Street, Suite 701, Boston, MA 02116

Boston | Chicago | Indianapolis | Los Angeles | Naples | San Francisco

The information included in this Presentation is not a complete analysis of all material facts regarding any company,

industry, or security and does not constitute investment advice. Opinions expressed or implied by the materials here

presented reflect only the judgement of its author as of the date of the Presentation and is subject to change without notice.

The information in this Presentation has been obtained from sources which G2 generally considers reliable, but we make

no representation or warranty, express or implied, as to the accuracy or completeness of any information herein. This

Presentation has been prepared for informational purposes only and upon the express understanding that it will be used

only for the purposes set forth in the Section captioned G2 Overview above. G2 expressly disclaims any and all liability

which may be based on such information, errors therein or omissions there from. Securities offered through Western

International Securities, Inc. Member FINRA & SiPC. G2 Securities and Western International Securities are separate and

unaffiliated entities.

Bob Kinder, Managing Director Jeffrey Unger, CEO

[email protected] [email protected]

617.918.7940 617.918.7929

Alex Koblansky, Vice President Shubz Chandna, Analyst

[email protected] [email protected]

617.918.7971 617.417.5891

Term Definition

Revenue

Total revenue from the sale of goods and services rendered during the reporting period, in normal course of

business, reduced by sales returns and allowances, and sales discounts. For banks, this item is defined as net

interest income after loan loss provisions

EBITDAEarnings before interest, taxes, depreciation, and amortization. Calculated as Revenue – Expenses, excluding

interest, taxes, depreciation and amortization

Market CapMarket value of a company using most recently reported basic weighted average shares outstanding. Calculated

as Market Price (as of period end) * Basic Weighted Average Shares Outstanding

Long-Term DebtSum of the carrying values as of the balance sheet date of long-term debt with a maturity beyond one year or the

normal operating cycle, if longer

Net DebtNet Debt shows the company’s overall debt situation by netting the value of debts with cash and other similar

liquid assets. Calculated as Total Debt – Cash & Cash Equivalents and Short Term Investments

Enterprise Value

Enterprise Value represents the combined economic value of a company as of the most recent fiscal year end.

Calculated as Diluted Market Capitalization + Total Debt + Minority Interest + Preferred Stock – Cash and Short

Term investments

P/EA valuation ratio of a company stock price compared to its per share earnings. Calculated as Market Price /

Earnings per Share for the last annual period

Tangible Book Value Total Shareholder’s Equity – Goodwill and Intangible Assets

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