Mar 15, 2009 20:08 UTC
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Guest article by Ian Cookson & Grant Thornton Corporate Finance LLC
Aerospace component M&A activity remained strong in 2008, and was one of the best performing sectors, with the same number of transactions as the record set in 2007. Activity was again weighted toward the first half of the year (in a 60/40 split), with a similar number of transactions in the second half of 2008 as 2007. Although 40% of transactions were led by private equity groups, this masks a shift in the second half where strategic buyers proved more successful in winning bids (by a factor of 3:1). Private equity buyers found it harder to raise the levels of debt that supported prices of previous acquisitions.
The strong level of aerospace component activity is in stark contrast to U.S. M&A activity as a whole, which declined by a third in volume terms from the prior year (and substantially more by value). However, the number of smaller deals across all industries (under $50 million) remained remarkably constant. It is this category of smaller deals that is more reflective of aerospace component transactions.
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Jan 28, 2009 20:09 UTC
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by P.W. Singer, The Brookings Institution
Something big is going on in the history of war, and maybe even humanity itself. The US military went into Iraq with just a handful of drones in the air and zero unmanned systems on the ground, none of them armed. Today, there are over 5,300 drones in the US inventory and another roughly 12,000 on the ground. And these are just the first generation, the Model T Fords compared to what is already in the prototype stage. This is what is happening now. Peering forward, one Air Force lieutenant general forecast that “given the growth trends, it is not unreasonable to postulate future conflicts involving tens of thousands.”
For my book Wired for War, I spent the last several years trying to capture this historic moment, as robots begin to move into the fighting of our human wars. The book features stories and anecdotes of everyone from robotic scientists and the science fiction writers who inspire them to 19 year old drone pilots and the Iraqi insurgents they are fighting. The hope wasn’t just to take the reader on a journey to meet this new generation of warriors–both human and machine, but also to explore the fascinating, and sometimes frightening, political, economic, legal and ethical questions that our society had better start facing in how our wars will be fought and who will fight them. In other words, “What happens when science fiction becomes battlefield reality?”
Despite all the enthusiasm in military circles for the next generation of unmanned vehicles, ships, and planes, there is one question, however, that people are generally reluctant to talk about. It is the equivalent of Lord Voldemort in Harry Potter, the issue That-Must-Not-Be-Discussed. What happens to the human role in war as we arm ever more intelligent, more capable, and increasingly more autonomous robots?
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Jan 25, 2009 18:14 UTC
Back in December 2005, “Russia to Dominate $5.33B Portable Anti-Armor Market Through 2014” covered analyst firm Forecast International’s global predictions for man-portable, unguided, anti-tank and bunker-buster weapons. In January 2009, the firm’s rolling forecast sees the market’s value holding steady at “over $5 billion” over the next 10 years, still sees Russia as the dominant player, and still sees European players grabbing a dollar share that outweighs their market share. Compared with 2005, however, there is a rising contender.
Forecast International sees Russian weapons accounting for 59.3% of global production in this segment, and 46.5% of the market’s dollar value through 2018. (2005: 68% of production and over 51% of market value through 2014)…
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Jan 06, 2009 14:24 UTC
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IBM’s Center for the Business of Government:
“One of the biggest challenges facing the new administration, as well as future administrations, is the effective acquisition of complex products… This report examines contracting for complex products by reviewing the U.S. Coast Guard’s experience with its Deepwater Program… a major “system of systems” acquisition to upgrade and integrate the Coast Guard’… Important elements are missing from the Deepwater story, notably the impact of contract management and the behavior of each party within the IDIQ(Indefinite Delivery/ Indefinite Quantity) contract design… Although Deepwater has garnered headlines for some of its stumbles, a more complete review of the early phases suggests a more mixed and balanced record.”
DID has covered numerous aspects of the US Coast Guard’s $25 billion Deepwater program-of-programs; “US Coast Guard’s Deepwater Effort Hits More Rough Sailing” offers a good summary of developments to date, and links to most of the key articles. Readers can download the full IBM CBG report [PDF], which recommends more investment in building up the acquisition workforce (a workforce that is often cut short-sightedly when budgets get smaller), which leads to a better understanding of risk drivers. They CBG also recommends a commitment to learning by trying different kinds of contracts for complex systems, ensuring that the contracts can be modified mid-stream in light of experience, and collecting lessons learned.
This report was also discussed in USCG Rear Admiral Blore’s Dec 31/08 blog post, where he states his general agreement with the report, and contends that most of its recommendations have already been implemented.
Dec 30, 2008 19:03 UTC
“Minerva as the Patroness
of American Liberty”
In this day and age, more people associate “Minerva” with a strict teacher at a fictional wizard’s school than with Rome’s incarnation of Pallas Athena, the Greek goddess of wisdom, knowledge, and war. As “WIRED: A Different Kind of Net-Centric Warfare in Iraq” revealed, however, Minerva’s ancient incarnation remains very relevant today. “The surge” in Iraq is best known for its increase in the number of American troops, but that was actually its least significant feature. Its most significant feature was a major shift in the way the Americans fought the war, using a counterinsurgency doctrine that acted on the lessons from successes like Malaysia – and on newer insights from social scientists embedded with the American military. See also General Petraeus’ December 2008 remarks in Washington [Transcript | Slideshow].
Defense Secretary Robert Gates has previously served as the president of Texas A&M University. Under his watch, the US DoD has unveiled The Minerva Initiative to foster longer-term research that’s relevant to the national security community. Now the first awards have been made under that program…
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Oct 26, 2008 18:22 UTC
SU-30K: Export star
The collapse of the Soviet Union triggered a twin collapse for Russia’s vast arms industries. On the one hand, revelation of the state’s bankruptcy collapsed domestic arms spending. As a follow-up punch, it also collapsed aid-financed exports to dependent Soviet client states. Russia’s arms industry has been clawing its way back ever since. During the 1990s, China effectively replaced Russia as the industry’s core domestic market, underwriting the R&D base and creating a springboard for further exports.
“Russian Arms Exports Rose to $5.78B in 2004” began to chronicle that comeback. In late 2005, “Russian Defense Industry Exports Stabilizing at $6B/Year, But Structure May Change” looked at some of the adjustments being made to Russia’s export sales arrangements, even as its industry was consolidated. In September 2008, “Russia’s Military Spending Jumping – But Can Its Industry?” looked at the challenges facing a sector that has lost most of its engineers, and now faces strong civilian competition for talent.
India and China remain Russia’s largest defense customers, though India is moving to diversify its defense imports by adding Western manufacturers to its mix. Even so, a major deal with Algeria may offer long-term promise if it holds, Indonesia has stepped up as a buyer, Libya may be next, and Venezuela is positioning itself as Russia’s next big customer. Konstantin Biryulin of the Federal Service for Military and Technical Cooperation of the Russian Federation (FSMTC) recently told RIA Novosti that arms export sales volume to Q3 2008 was 23% higher than the same period in 2007, which finished at $7.4 billion. Pravda.
Aug 28, 2008 15:23 UTC
In 2006 Saudi Arabia announced a raft of arms purchases, from mobile howitzers, to helicopters, to advanced fighter aircraft. More requests have followed, including a controversial request for JDAM GPS-guided bombs. Many of these official requests have yet to turn into firm contracts, but the volume of fulfilled requests has attracted attention nonetheless. So, too, has the diversification of Saudi suppliers, as Russia enters the arena for the first time. Will Saudi spending continue? How significant is it? Forecast International… forecasts:
“Faced with both internal and external threats to its security, Saudi Arabia will continue to boost defense spending significantly over the coming years… Record-high oil prices, substantial influxes of energy revenues and an unyielding global demand for Saudi petroleum, meanwhile, will continue to serve as enablers… Saudi defense and security spending – estimated by Forecast at around $36 billion for 2008 – will reach almost $44.5 billion by 2012… the fledgling Saudi defense industrial base is limited primarily to maintenance work thus leaving Riyadh heavily dependent upon international suppliers for its equipment. As a result the Saudi market is not only the largest for defense equipment in the Middle East, but one of the largest worldwide.
…Meanwhile, the Saudi government is attempting to rectify its defense industrial shortcomings, partly by increasingly insisting on offsets and technology transfers as conditions for arms purchases. The defense ministry is also initiating a program to domestically-produce spare parts for its weapons platforms, and a ‘Saudization’ process whereby a shortage of technically-qualified workers is filled through increased ranks of trained, qualified Saudi workers. Despite these initiatives progress in developing the Saudi defense sector is slow and its projects and workforce remain foreign-dominated…”
Jul 22, 2008 17:50 UTC
Low value. Corrupt. Aid-driven. Despite the odd exception like Algeria, and South Africa’s indigenous defense industry, most people think of these terms when they think of the African defense market. Analyst firm Forecast International sees a different picture, however: “tomorrow’s growth market for the global defense industry.”
This assessment didn’t come from reading Nigerian email solicitations. F.I. admits that overall African spending isn’t expected to suddenly become impressive: 3.5% increases year-on-year from 2007-2011 to $15.9 billion, with under 20% of defense budgets slated for procurement.
That isn’t much to write home about, but “African Market Overview” author Matthew Ritchie sees the opportunities in much more specific terms. Meanwhile, Konstantin Makienko of Moscow Defence Brief discusses the key features of the arms market in Africa, and explains how they have worked to shift Russia out of its dominant role, in favor of China. His chronicle of Russian exports reveals at least one recent market success, however – in Sudan…
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May 26, 2008 17:36 UTC
The US Air Force Association recently released a video entitled “Threats to Air Supremacy,” which offers a very basic look at emerging land and air-based threats to America’s “teen series” fighters in particular. Given the importance of air supremacy to American military doctrine, this is an issue that can be expected to become more prominent in coming years. As such, we present a Flash-based version below, without commentary, as a service to our readers.
The video can also be viewed using Windows Media Player: [High-res | Low-res]
Apr 09, 2008 20:08 UTC
With American elections approaching, questions are being asked in the industry about the potential implications for American defense policy. In January 2007, “The Impact of Recent Political Changes on the Defense Sector” transcribed Loren Thompson of the Lexington Institute think tank, during the Raymond James Washington Technology & Services Summit. It offered some interesting thoughts on the contractor/ military political gap, and added:
“The bottom line on the Democratic defense agenda is that it doesn’t reflect much support for new technology outlays, but it also doesn’t herald an era of rapidly declining defense budgets. What’s likely to change is the composition of defense spending rather than the scale.”
Fast forward to February 2008, where Thompson is speaking to US Army Leaders at the RAND Arroyo Center. “The Role Of Party Politics In Shaping Defense Priorities” offers an impartial presentation of how the two major parties evolved, how they think about national security, their inclinations and allocation preferences with respect to the defense budget, and what a victory by either side probably means. Unusually, it is a fair presentation that puts forward each party’s broad view reasonably faithfully. Which matters, because:
“…we need to understand how party politics shapes defense policy — not because we like it, but because it is a fundamental reality of life in a democracy. Did you know that a recent study of weapons outlays found 91% of all the variation in spending over the last four decades was traceable directly or indirectly to which party controlled the Senate and the White House? Like me, you probably thought that threats were the main driver of weapons spending, but the data show otherwise.
Read both speeches, consider your own experiences, and decide what you think. Thompson also changes his tune slightly, however, when he says that:
“… if the Democratic Party wins control of the White House and Congress in November, it will take a huge demand stimulus from the likes of Osama bin Laden to prevent a leveling off and then decline in defense spending in subsequent years.”
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