In an October analysis, the aerospace/defense team at Houlihan Lokey noted that a number of defense services businesses have been held for some time by private-equity firms. These investors will not hold their properties indefinitely and will seek returns, possibly through strategic action.
Finally, there are some market sectors in the U.S. that could be more sharply defined, depending on the outcome of major defense programs and competitions. Decisions on the Armored Multi-Purpose Vehicle, Ground Combat Vehicle and Joint Light Tactical Vehicle in 2014-15 could trigger losers in these competitions, or program funding decisions to look anew at their competitive positions in defense vehicle markets. The fate of Boeing's F/A-18 and C-17 programs may also spawn strategic rethinking among suppliers. Rotorcraft remains a mature sector for now, but one where changing demand and new product development spawns strategic reassessments.
Contributing columnist Byron Callan is a director at Capital Alpha Partners.