Goodrich’s AIS Acquisition, and Its Implications
Related Stories: Americas - USA, BAE, Industry & Trends, Mergers & Acquisitions, Other Corporation
On Nov 17/09, J.F. Lehman & Company reached an agreement to sell Atlantic Inertial Systems to Goodrich Corporation, for about $375 million, subject to customary government approvals. AIS’ 2009 sales are expected to be approximately $180 million, but that’s expected to grow significantly over the next several years. Hence the price of approximately 9x estimated adjusted EBITDA.
Goodrich saw AIS’ portfolio of inertial sensors, inertial measurement units (IMUs), integrated IMU/GPS systems, stability systems, and terrain avoidance systems as an excellent complement to Goodrich’s guidance, control and navigation systems. AIS joins other recent Goodrich acquisitions such as Sensors Unlimited, TEAC Aerospace, former CROWS manufacturer Recon/Optical, and Cloud Cap Technology.
As James Hasik, our February 2009 guest author of “Arming the Bug Hunt: Industry Changes and Opportunities” points out, the most interesting fact is never mentioned in the releases:
AIS had spun out of BAE systems in 2007, for $140 million in cash. Hasik notes:
“After pulling it out of its parent company, Lehman more than doubled AIS’s value in two years, and in deteriorating military-economic conditions.
That’s such a healthy return that it may lead one to ask why BAE Systems itself couldn’t realize this value from the property. Even so, heaping criticism on BAE would be a bit unfair here. The company makes nuclear submarines, armored fighting vehicles, and perhaps half of every Eurofighter. The span of control needed to administratively control all those activities is just too great. BAE Systems is a 100,000-person company; AIS is an 800-person company. That necessarily puts the embedded operation well below the fold of top managerial attention. Thus, there may be more underperforming assets in the portfolios of big companies in the industry that either need to be turned around to face the opportunities of the twenty-first-century arms industry, or sold off to someone who can take them there.”
See: Goodrich release | AIS release | James Hasik: “Boeing’s new bomb, Goodrich’s new MEMS, and further thoughts on military-industrial restructuring”.
