On February 24, 2021, Southern California-based AeroVironment, Inc. (NasdaqGS:AVAV) announced the closing of its acquisition of Intelligent Systems Group (ISG) from Progeny Systems Corporation. Just days earlier on February 22, 2021, AeroVironment announced that it had closed on its acquisition of Arcturus UAV, Inc. ISG is a small group of around 40 employees developing artificial intelligence-enabled computer vision, machine learning, and perceptive autonomy software solutions for the intelligence and defense community, while Arcturus is a larger company of around 270 employees, designing and manufacturing unmanned aircraft systems (UAS) and providing related services. ISG was an all-cash transaction, acquired for up to $36 million, consisting of $30 million upfront and $6 million in earnout over three years, based on the achievement of specific performance targets. Arcturus was acquired for $405 million under a cash and stock transaction, consisting of $355 million in cash and $50 million in AeroVironment stock at closing, translating to 573,794 shares based on a 30-day volume weighted average price through the last business day prior to execution. The shares are subject to lock-up restrictions, to be released in three equal tranches of 6-, 12-, and 18-months following issuance.

For the most recently reported periods, ISG reported twelve-month revenue of $10 million, while Arcturus reported revenue and adjusted EBITDA of $84 million and $35 million, respectively, translating to acquisition multiples of 3.6x and 4.8x revenue and 11.6x adjusted EBITDA.

Virginia-based ISG, which was part of the larger Progeny Systems Corporation, was founded in 2006. Its team of around 40 employees has served several high-profile clients, including the Pentagon and other intelligence agencies. California-based Arcturus, founded in 2004, is a leading designer and manufacturer of Group 2 and 3 high performance UAS, primarily serving organizations under the U.S. Department of Defense as well as international allied governments. The team of around 270 employees at Arcturus are developing the next future defining capabilities.

acquisitions provide AeroVironment with significant advancements in technologies and capabilities and position AeroVironment well for its strategic growth objectives. Regarding the ISG acquisition, AeroVironment President and CEO, Wahid Nawabi stated, “Acquiring ISG will enhance the intelligence of our growing, multi-domain robotic systems portfolio, increase customer-funded research and development revenue and deepen our relationships with strategically important customers.” With the acquisition of Arcturus, he stated, “Together, we will offer an unmatched portfolio of multi-domain unmanned capabilities, supported by our ongoing investments in artificial intelligence and autonomy, to help our customers address a broad set of defense and commercial missions.”

The ISG acquisition was funded through existing cash resources, while Arcturus was funded through a combination of existing cash resources and loan proceeds. AeroVironment expects the Arcturus acquisition to be immediately accretive to earnings.

About PierCap Partners:

We are a mergers and acquisitions (M&A) investment bank based in San Diego. M&A is our singular focus. Whether you are thinking of acquiring / selling a business, or taking some chips off the table, we run a well-disciplined process that secures best possible value, minimizes disruption and manages the delicate balance and spirit of collaboration. With over $2 billion in aggregate transaction value and 35+ years of combined experience, our leaders bring operational expertise, an owner’s perspective, and Wall Street solutions to you. Find out more about our focus, services and experience.