The rise of non-state actors, whether terrorists intent on attacking a warship, drug traffickers plying their illicit wares, or pirates intent on theft could mean opportunities for technology geared at making the US navy nimbler.
Areas that are ripe for M&A include unmanned surface vehicles (USVs), autonomous underwater vehicles, and marine sensor equipment, according to industry sources. Companies that build this technology have value in homeland security, intelligence, dismantling mines, and commercial applications in oil tethering, the sources suggested.
Companies that could see interest for their R&D include Spatially Integrated Systems, Accurate Automation, Coda-Octopus, Techno-Sciences and Sound and Sea Technology, according to executives at those companies.
Still, the market itself has limitations, said Chis von Alt, CEO of Hyrdoid, an unmanned underwater vehicle maker that was acquired by Norway-based Kongsberg Gruppen (OSL: KOG) in July. "USVs have connectivity and bandwidth issue that you don't have with UAVs (unmanned aerial vehicles)." Von Alt also said that adoption has been slowed through resistance from the Navy's surface captains. "[Ship captains] aren't always thrilled about unmanned ships zipping about their battlespace." Even so, national security demands and changing threats are making the technology that much more valuable, he noted.
Spatial Integrated Systems is open to talking to bankers about possible M&A, according to an executive at the company. The private, Rockville, Maryland-based firm specializes in applying 3D data capture to a wide range of engineering and systems integration tasks, including the development of an autonomous marine vehicle navigation and situation awareness system.
Accurate Automation, a private Chattanooga, Tennessee-based developer of unmanned vehicles, said that the company was absolutely a target for the large primes. The company develops both UAVs and USVs, as well as parts and engines for those vehicles.
Three companies with strength in marine sensor equipment could also be potential targets. In an earlier interview, Techno-Sciences CEO Gilmer Blankenship said the company is looking to examine its options, which could include a merger, partnership or outside investment. The company is looking at participating in larger projects that can utilize its R&D, and M&A is one way to achieve that goal, he said. Techno-Sciences is a Maryland-based provider of sensor technology to the US Navy. The technology is currently being used off the coast of Indonesia to alert authorities to pirate activity.
Another company that specializes in underwater technology is Coda Octopus. In an interview last year a Coda Octopus executive said the company continues to see acquisition interest. Coda’s primary product is 3D real time sonar, the only such product available, according to a company executive. Coda Octopus is an OTC-traded, New York-based underwater technology company. It has a market capitalization of USD 7.35m, down from USD 36m in December 2007.
Owner Dallas Meggit of Sound & Sea Technology, said a sale is its likely exit, although it is not on the market right now. Then again, “no one has made us an offer," he added. The company has had significant growth, he noted, having received USD 40m in contracts since 2002. The company develops sensors for three primary applications: oceanographic, counter-terrorism and force protection.
Water-borne threats are seriously underestimated, Meggit said. The US must face these challenges head on, to deal with risks that are primarily but not exclusively non-state actors.
by Charles Rice and Kevin Nafziger in Washington, DC
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