September 2014 M&A Market Update: Federal M&A Trends in Spin-Off and Divestiture Transactions

ACP Market Update
October 24, 2014

Federal contractors continue to adapt to the well-documented budget constraints. Competition for government contracts has increased, leading to bidding wars with more aggressive offers and slimmer margins. An increase in competition can typically spark M&A activity as companies vie for contracts and resort to acquisitions to expand their capabilities and win business. Through Q3 of 2014, public companies have been involved in roughly 50% of the deals, sparking a reemergence of mega mergers and consolidation amongst large industry players. While some companies have consolidated through acquisitions, like Cobham’s $1.5 billion purchase of Aeroflex, and AECOM’s $6.0 billion acquisition of URS Corporation, other major contractors have been spinning off, or divesting, divisions to increase focus on specific business segments more aligned with companies’ overall strategic initiatives. B/E Aerospace announced on June 10, 2014, its spin-off into two separate publicly-traded companies, focusing on manufacturing and services.  On September 27, 2014, Exelis announced the successful spin-off of its mission systems division, now known as Vectrus (NYSE:VEC), from its C4ISR and IT-focused businesses.

Read the entire Market Update for a detailed review on the following topics:

  • Recent M&A Activity Sees Emergence in Spin-Offs and Divestitures
  • Case Study: Exelis Inc. Spin-Off of Vectrus, Inc
  • Other Large Scale Divestitures and Spin-Offs
  • Selected M&A Transactions
  • Government Services Industry Performance
  • Public Company Comparables
  • Recent Industry M&A Transactions
  • Representative ACP Transactions