discussion on defense m&a - cyber security summit€¦ · 3/10/2017 · cyber security summit...
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Discussion on Defense M&A Bob Kinder, President, SixGen, Inc. Senior Advisor to G2 Capital Advisors
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Agenda
• M&A Trends and Activity • Budget and Strategy Uncertainty • Continuing Resolution • DoD Spending – Areas of Focus • Cyber Spending and Focus • Discussion
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
M&A Trends
• IT Modernization – 2015 Lockheed Martin & Leidos Deal
• Big Primes Acquiring IT Providers to offset expiring contracts
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Trends
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Trends
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Public Trading – Defense Technologies
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Public Trading – Diversified Industrial (Aerospace)
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Government Services
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
M&A Activity – Middle Market Total deal activity remained steady since Q2 2013; overall deal multiples remain strong.
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
M&A Activity by Acquirer Type
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Uncertainty Affecting Spending • National Security Strategy (NSS) Mandated by Goldwater-Nichols Act of 1986. Not released since 2015 • No Budget and Continuing Resolutions ”Normal” • Budget Control Act (BCA) – Greater Threat
to Security
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Continuing Resolution – What is it? • Bill to fund government operations expires
December 8th, 2017 • 10-week stopgap budget measure restricting
spending levels – lock in FY-18 government spending at FY-17 levels and prohibit start of new programs
• Advance Procurement Funding cannot be spent to initiate multiyear procurement contracts
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Impacts on Defense of Operating under CR
• Scaled-back training exercises • Delayed induction of 11 ships • Postponement of all Army “noncritical” maintenance • Curtailment of Hiring and Recruitment • Rising Acquisition Costs from Severed Contracts
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Defense Budget and Continuing Resolution • DoD sent White House a detailed list of ~75
acquisition program priorities, “Consolidated Anomalies List” it hoped to exempt from CR restrictions
• OMB Denied Request
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Additional Continuing Resolution Effects • DoD in battle with private industry for Cyber
talent • President, Congress and DoD want to add military personnel in areas like Cyber, Pilots and Nuclear Specialists
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Where is DoD Spending?
• Intelligence, Surveillance and Reconnaissance (ISR)
• Special Operations • USN New Ships and Maintenance/Overhaul • USAF - F35 • Cybersecurity Forces
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Cyber Spending and Focus
• Federal Cybersecurity spending reached historic high of $19.8 Billion
• Number of Cyber vendors active in Federal marketplace increased by 55% in past five years
• Cyber Defense spending growth slowing, while spending on Cyber Resilience and Offensive Capabilities rising
• Push to Modernize legacy IT systems – Greater adoption of Cloud
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Discussion
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Cyber Security Summit | October 23-25, 2017 | Minneapolis, MN | cybersecuritysummit.org
Summary
• M&A Trends and Activity • Budget and Strategy Uncertainty • Continuing Resolution • DoD Spending – Areas of Focus • Cyber Spending and Focus • Discussion