By Marvin Stenersen and Gabriela Lenerte (Stockholm School of Economics), Friedrich von Storch, Enrique Pérez-Hernández and Ties Oudmayer (IE University)
Photo: Meric Dagli (Unsplash)
Overview of the deal
Acquirer: Advent International, with minority investment by BCI
Target: Maxar Technologies
Total Transaction Size: $6.4bn
Announcement date: December 16th 2022
Closed date: Mid-2023, “go-shop” period ends on February 14th 2023
Target advisors: J.P. Morgan (financial), Watchell, Lipton, Rosen & Katz (legal)
Acquirer advisors: Goldman Sachs and Morgan Stanley (financial), Weil, Gotshal & Manges (legal)
The deal shows a step by Advent International into investments into the fledgling space and satellite industry. After the deal Maxar will be able to increase its investment into next generation satellite technologies and have the capital to sustain its R&D, in addition to benefiting from Advent’s recently developed significant resources and operational expertise across the defence and aerospace sectors.
“Advent has a proven record of strengthening its portfolio companies and a desire to support Maxar in advancing our long-term strategic objectives. As a private company, we will have enhanced flexibility and additional resources to build on Maxar’s strong foundation, further scale operations and capture the significant opportunities in a rapidly expanding market.” - Daniel Jablonsky, President and CEO (Maxar)
Company Details (Acquirer - Advent International and BCI)
Advent International: Advent International was founded in 1984 by Peter Brooke in Boston, and has an AUM of $89 billion. It has a focus across 5 key sectors: Technology, Business & Financial Services, Healthcare, Industrial and Retail, Consumer & Leisure. Their focus lies in buyouts, but also growth and strategic restructuring.
BCI - British Columbia Investment Management Corporation: BCI is a large institutional investor from Canada with C$211.1bn AUM. It focuses broadly and invests across industries, and has a history of working with strategic private equity partners to source and manage direct and co-investment opportunities with them.
Company Details (Target - Maxar Technologies)
Maxar Technologies is a space technology company specialising in and providing manufacturing communication, satellite imagery, spacecraft and robotics for space exploration, research, and national security. Maxar is the indispensable mission partner of the U.S. Government, providing 90% of the foundational geospatial intelligence used by the administration. The company collects over 3.8 million sq km of high-resolution imagery per day and has seen over 285 Maxar-built spacecraft launches.
Founded in 2017, headquartered in Westminster, Colorado, USA
CEO: Daniel L. Jablonsky (since January 2019)
Number of employees: 4,400
Market Cap: $3.8bn (as of 06/01/2023)
EV: $6.1bn
LTM Revenue: $1.75bn
LTM EBITDA: $418mn
LTM EV/Revenue: 3.4x
LTM EV/EBITDA: 14.6x
Projections and Assumptions
Short-term consequences
Advent’s acquisition of Maxar, one of the largest Leveraged Buyouts in recent months, comes at a time in which the financing environment has become highly challenging for Private Equity firms, who are now forced to commit larger amounts of equity to make deals happen. As a result, of the total deal value of $6.4bn, Advent had to commit $3.1bn in equity financing with British Columbia Investment Management Corporation contributing another $1bn of equity. Although Advent may be able to replace some of the debt with equity at a later stage, this may take some time as leveraged loans issuance has declined 44% in the first nine months of 2022 compared to last year and yields on these loans have increased more than twofold to about 9.6%.
As part of the deal, Maxar will try to leverage Advent’s significant expertise and track record of deals in the defence, security and cybersecurity industries. In the past three years, Advent has invested around $28bn in the sectors and its portfolio companies support various satellite and defence platforms of the U.S. government and its allies. As a private company, Maxar is in the position to increase investments in satellite technologies and data insights, which serve its government and commercial clients.
In addition, it can focus on the delivery of the new Legion imaging satellite constellation, which has been stalled by delays, and accelerate the launch of the next-generation Legion 7 and 8 satellites. Furthermore, Maxar intends to build out its Earth Intelligence and Space Infrastructure businesses through increased investments.
Long-term Upsides
Post-transaction, as a private company, Maxar will be able to increase investments in next-generation satellite technologies and data insights that are vital to the company’s government and commercial customers, and pursue select, strategic M&A to further enhance the company’s portfolio of solutions. Maxar added that it will be better positioned to successfully deploy a $600mn next-generation WorldView Legion imaging constellation, a program that has been plagued by delays.
Daniel Jablonsky said that Advent is also committed to the satellite manufacturing business. “That’s been part of the turnaround story here at Maxar,” he said, noting the company recently received orders for two new Sirius XM satellites. “We are excited about continuing to do that.”
Maxar will remain a U.S.-controlled and operated company, and in May secured a $3.2 billion agreement with the National Reconnaissance Office to provide imagery over the next 10 years. Having faced headwinds from declining commercial orders, Maxar has pursued, and will likely continue to pursue, defence and intelligence contracts.
“In our view, Maxar is a uniquely positioned and attractive asset in satellite manufacturing and space-based high-resolution imagery, with an incredible workforce and many opportunities ahead,” said Shonnel Malani, Managing Director and Global Head of Advent’s Aerospace and Defense team. “We have strong conviction in the growing need for the differentiated solutions Maxar provides, and our goal is to invest in expanding Maxar’s satellite constellation as well as supporting Maxar’s team to push the boundaries of innovation, ensuring mission success for its customers.”
Risks and Uncertainties
Advent has agreed to acquire all outstanding shares of Maxar common stock for $53.00 per share in cash. The purchase price represents a premium of approximately 129% over Maxar’s closing stock price of $23.10 on December 15, 2022. Historically, a premium of 129% is very high compared to the historical norm, 30% - 50%. However, in 2022 there was a significant market correction which especially affected the tech industry. The market correction resulted in the valuations of the companies dropping significantly. Therefore, premiums have been affected, and so in the second and third quarter of 2022 they have increased to over 100%, on average.
Furthermore, including debt, the deal is valued at $6.4bn, marking one of the largest leveraged buyouts in recent months. The debt, $2.4bn, represents a meaningful percentage of the total valuation which could mean there is risk of potential default. However, it is important to note that both the enterprise value and net debt to EBITDA multiples are important to truly understand whether a 129% premium and 37.5% of debt is frankly significant or not.
Also, it is worth noting that the agreement includes a 60-day “go-shop” period expiring on February 14, 2023. During this period, Maxar and its advisors have the right to actively initiate alternative acquisition proposals from third parties. However, given Maxar looks to leverage its position as a private company, and given the difficulty of debt financing in the current environment, it is unlikely a rival bid from a private equity firm will surface in this short time span.
“Maxar’s mission has never been more important, and this transaction allows us to maximize value for stockholders while accelerating the Company’s ability to deliver its mission-critical technology and solutions to customers over the near and long term.” - General Howell M. Estes, III, Chair of Board of Directors (Maxar)