L3 Technologies Transformed through the Art of the Deal

by Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.

L3 Technologies  – one of the world’s most dynamic aerospace and defense firms – is not shy about moving quickly to adapt its portfolio through numerous acquisitions and divestitures.  Most recently, the company has initiated some larger deals that have transformed its operations.

The biggest deal to date: The 2016 divestiture of L3’s National Security Solutions unit to CACI for $550 million.  Due to its focus on military services, this operation was, perhaps, the hardest hit by the recent economic downturn.  Increased competition combined with the U.S. military’s drawdown in the Middle East to create a difficult outlook.  Under CACI – a dedicated services company – the operation can benefit from increased economies of scale.

As L3 looks ahead, more portfolio pruning is anticipated for operations that are no longer considered a core part of the company’s goals.  At the same time, L3 will not hesitate to add firms that can build critical mass in key areas.

Commercial aviation training and simulation is one of these areas.  Here, L3 has added operations with CTC Aviation, an airline pilot training and crew resourcing specialist.  The company previously acquired Thales Training & Simulation in the U.K., a specialist in commercial flight simulation equipment, which has an installed base of more than 540 simulators, a significant global customer roster, and operates a training center in Asia.  The addition of these operations to L3’s existing military training and simulation business, enables the company to offer a full range of training system solutions to military and commercial customers worldwide.

With a new administration set on increasing defense spending, the fear of sequestration has been ameliorated.  That said, the impact of the reductions led many firms to tighten operations, which should lead to greater returns from any new spending increases.

Finally, as a culmination of all its recent changes, L-3 Communications changed its name to the more-encompassing L3 Technologies.   This change capitalizes on L3’s strong brand recognition, while better reflecting the company’s evolution into a global provider of a broad range of technology solutions.

Overall, thanks to management’s dynamic and fluid mindset, L3 is concentrating its resources on defense areas that are expected to remain strong and, through select divestitures, is cutting its vulnerabilities in areas that may be weakening.  Further, the company’s focused acquisition paradigm should continue to increase its bottom line.

The Defense & Aerospace Companies series focuses on worldwide aerospace and defense prime contractors and subcontractors. Concise reports provide data on individual corporations regarding recent mergers, restructurings, and joint ventures, along with a Strategic Outlook that examines the company’s strengths, weaknesses, and opportunities. Also included in each report are financial and industrial segment data, snapshot coverage of major programs, and recent U.S. Department of Defense contract awards.

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