FOCUS Investment Banking Presents C4ISR Industry Review and Outlook
Overview
The United States Military is increasingly focused on electronic warfare and cyberattack defense. These priorities are reflected in the Department of Defense (DoD) budget as well; 40% of the DoD’s military budget is allocated towards the procurement of military electronics and technologies. A large amount of capital must be spent on the upgrades needed to achieve this level of modernization, a primary driver of demand within this space. The DoD is expected to invest approximately $30B in electronic warfare capabilities over the next 3 years.
The military’s shift from physical fighting to electronic warfare and cybersecurity has created M&A opportunities for industry players, who are growing their companies by acquiring smaller companies with specialized capabilities within the C4ISR space.
FOCUS Telecom Business Services Quarterly: Summer 2020 Report
Public Markets
The FOCUS Telecom Business Services Index (TBSI) benefitted from the overall market correction to March’s downturn and grew 17.4% over the past three months. Despite this strong performance, the sector still underperformed both the 20.0% gain in the S&P 500 and the 30.6% rise in the NASDAQ over the corresponding time period.The trend is similar for the full year period as the TBSI dropped 2.5% compared to 5.4% and 25.6% increases in the S&P 500 and NASDAQ indices, respectively. The sector revenue multiple held steady compared to this same time last year at 0.6x. However, the EBITDA multiple for the sector fell from 8.6x a year ago to 7.4x currently after a March low of 5.9x.
FOCUS U.S. Communications Service Provider Quarterly: Summer 2020 Report
Public Markets
The FOCUS Communications Service Provider Index (CSPI) rebounded strongly from the steep decline in our spring report to post a gain of 10.4% in the past three months. Even so, this period’s gains still did not erase all of the losses from the spring. In addition, the CSPI also significantly underperformed both the 20.0% gain in the S&P 500 and the 30.6% gain in the NASDAQ over the corresponding time period. The sector also underperformed the broader indices for the full year as the year-over-year loss of 3.3% in the CSPI compares unfavorably to both the 5.4% gain in the S&P 500 and the 25.6% gain in the NASDAQ. Sector multiples are largely consistent with where they were a year ago. The sector revenue multiple dipped slightly from 2.8x to 2.7x, while the sector EBITDA multiple held steady at 7.8x.
FOCUS Carrier-Focused Telecom Technology Quarterly: Summer 2020 Report
Public Markets
After four straight reports with negative returns, the Carrier-Focused Telecom Technology Index (CFTTI) finally bounced back with a strong return of 12.6% in our summer reporting period. This outperformed both the S&P 500 (up 3.1%) and the NASDAQ (up 10.8%) by a wide margin. Even with this period’s strong performance, the CFTTI still significantly lags the broader indices over the full year. The CFTTI is stuck in negative territory with a 12-month loss of 3.5%, while the S&P 500 and NASDAQ are up 10.6% and 27.3%, respectively, over the course of the past year. Multiples are also slightly lower for the sector compared to the year-ago period. The sector revenue multiple dropped from 2.5x to 2.4x, and the sector EBITDA multiple fell from 14.0x to 11.5x.FOCUS Enterprise-Focused Telecom Technology Quarterly – Spring 2020
Public Markets
While a 2.0% drop in the Focus Enterprise-Focused Telecom Technology Index (EFTTI) over the course of a three-month period would normally be considered disappointing, given the current environment for public equities it seems like a victory. This is highlighted by comparing it to the three-month drop in the S&P 500 of nearly 10%, and it also beats out the 2.9% decline in the NASDAQ over the same time frame. Sector performance is not as strong when measured over the full year period as the 11.9% decline in the EFTTI stacks up unfavorably compared to the 1.1% decline in the S&P 500 and the 9.8% gain in the NASDAQ. Sector multiples are also down significantly compared to this same time last year.The sector revenue multiple dropped nearly a full turn from 4.8x to 4.0x, while the sector EBITDA multiple fell from 20.3x to 16.6x.
White Paper: Private Equity Investment in Dermatology – April 2020 State of the Market
After seven strong years, private equity investment in dermatology has been in decline since 2019. Now, elective procedure bans and shelter-in-place orders have practice owners wondering if the opportunity to sell has passed. This paper examines the differing views on pe-backed consolidation, key performance indicators, investor activity, and saturation by geography and practice size. We see several positive factors for our current and potential clients within a coming private equity player restructuring.
Insight and Perspective: Middle Market M&A Activity in the Current Environment
It is no surprise that middle market M&A has not escaped the current economic crisis—as it is filled with companies across a wide array of industries that have been seriously impacted by the country’s abrupt slowdown. However, the effect has not been uniform across industry sectors and the stage in the process. Some sectors continue to press ahead while others have halted altogether. FOCUS Investment Banking has been asked by several partners to provide insight and perspective on the current state and future outlook for middle market M&A given the current market environment. FOCUS gathered the questions and then engaged with its team of over 40 bankers and senior advisors, across its ten industry practices, gathering responses to the questions posed.
FOCUS U.S. Communications Service Provider Quarterly: Spring 2020 Report
Public Markets
Not surprisingly given the current state of the public markets, it was a challenging three-month period for the FOCUS Communications Service Provider Index (CSPI). The sector plummeted just shy of 20% over this time frame, which was roughly in-line with the 20.0% drop in the S&P 500 but greater than the 14.2% drop in the NASDAQ over the corresponding time frame.The situation looks a bit better when measured over the full year period.The CSPI was down only 9.3% in the past 12 months, although once again this underperforms both the S&P 500 (down 8.8%) and the NASDAQ (down 0.4%). Sector multiples are lower than they were in the year-ago period, although the drop is not as dramatic as we might have feared.The sector revenue multiple dipped from 2.7x t0 2.5x, while the sector EBITDA multiple fell from 8.0x to 7.2x.
