Quarterly Industry Review

In this issue . . .
+ Key trends
+ M&A outlook
+ In the news
M&A . Divestitures . Capital Raising . Fairness Opinions . Recapitalizations
+ Current mandates
Costa Mesa . Chicago . Boston . New York . London
888.900.0411 . www.rsmequico.com
Member FINRA, SIPC.
Q1.2008
International mandates are handled by or in conjunction with RSM EquiCo Canada Inc. (limited market dealer registered with
the Ontario Securities Commission) or EquiCo Europe Ltd (authorized and regulated by the Financial Services Authority).
©2008 RSM EquiCo Capital Markets LLC
The following information was compiled Key Trends In the News
by RSM EquiCo Capital Markets’ Aerospace
Boeing Loss to Northrop Creates Stir action not only leaves a gap in next-generation fighter production (until the F- Airbus recently confirmed rumors that the pending sale of two of its sites
& Defense Investment Banking Group
The $1.5 billion initial U.S. Air Force ASC award to Northrop Grumman for the new KC-45 refueling tanker 35 enters full-rate production), but it also effectively leaves the final decision (Varel and Augsburg) has been officially called off. Airbus Chief Executive
and shared exclusively with our aerospace on the F-22 to the next Tom Enders said that, “a viable industrial and financial solution was not
has created ripple effects on the U.S. supplier base that are being intensely debated. The award, which
and defense industry clients and contacts. has the potential to grow to $35 billion, not only puts Northrop in a favorable position on future transport administration. The future of achievable.” The failure of Airbus to
aircraft, but it also has given Airbus an important foothold in the the C-17 is once again transform its supply chain illustrates
By tracking all related industry uncertain, since no funding several key issues surrounding today's Consolidation among
U.S. market, since the winning proposal featured the European-
transactions, we constantly strive to designed A330. It is clear the issue dollars were allocated to the A&D industry. tier 1 and tier 2
bring you the most up-to-date and Following the decision, both Boeing and politicians on Capitol Hill of globalization production line in Long Beach, Weakness in the U.S. dollar has pushed suppliers will happen
accurate view of merger and acquisition protested that the award will sacrifice American jobs and will continue to Calif. For the past several many fixed-rate dollar contracts into in the near-term as
activity within the aerospace and defense opportunities. The validity of that point is debatable, since the new dominate headlines years, Congress has filled the unprofitable terms for the European the supply chain
void with additional dollars in
industry. KC-45 will be assembled at manufacturing facilities in Mobile, Ala. and directly affect supply base. These multi-year, dollar- grapples with the
the supplemental budget. denominated agreements have left
by 25,000 American workers. This issue highlights the ongoing future (DOD) Final decisions regarding these and other programs will have to be made, but
challenges of
We trust you will find this information trend towards globalization of aerospace and its associated pains. many European suppliers struggling to
contract awards. it appears they will be left to the next commander-in-chief. maintain minimal margins. The euro's
a weakening dollar.
valuable in determining your business On one hand, this award, based on a stringent set of technical
specifications, will provide U.S. troops with the best possible strength relative to the dollar has
and financial goals.
equipment at the lowest cost to the American taxpayer. On the other, Department of Defense dollars will Recent M&A Transactions forced EADS to delay its “Power 8” plan, which was aimed at streamlining the
directly benefit a non-U.S. company. While the overall net effect is uncertain, it is clear the issue of Airbus supply chain. RSM EquiCo believes that consolidation among tier 1 and
globalization will continue to dominate headlines and directly affect future contract awards. Date Target Value (US$mm) Buyer tier 2 suppliers will happen in the near-term as the supply chain grapples with
Paul T. Weisbrich Pending Northrop Grumman $175 L-3 Communications the challenges of a weakening dollar.
Senior Managing Director Dreamliner Deliveries Potentially Delayed (Electro Optical Systems)
It appears that the first deliveries of the B787 may be further delayed after Boeing's largest customer Pending Sparta Inc. $416 Cobham plc Current RSM EquiCo Mandates
For more information, contact our claimed that the already delayed timetable for initial deliveries of the 787 Dreamliner is unachievable. 01/18/08 Tenix Defense Pty $682 BAE Systems plc
Aerospace & Defense Investment Steven Udvar-Hazy, chairman of International Lease Financial Corp, recently expressed his view that the ! Project Ripcord - International provider of devices for use in egress
Banking Group. 01/31/08 SG Brown Ltd $55 Teledyne Ltd
first flights will be delayed an additional three months due to required structural design changes to the systems in the military and commercial aerospace markets (Midwest)
02/2/08 EOIR Technologies $34 White Oak Group
Paul T. Weisbrich center wing box. Though Boeing Source: Capital IQ
! Project Volt - Provider of test and measuring equipment for frequency
Senior Managing Director reaffirmed its delivery schedule, this control devices (Southwest)
714.327.8680 (predicted) delay highlights
pweisbrich@rsmequico.com M&A Outlook ! Project Plasma - Provider of sophisticated interconnect solutions
challenges in the global commercial offering increased data and content throughput for specialty avionics
Sean C. Walker aerospace supply chain similar to Despite a dynamic credit environment and an uncertain macroeconomic
applications (Northwest)
Senior Vice President those that forced Airbus to delay the backdrop, we remain confident about the near-term prospects for M&A in the
714.327.8661 aerospace and defense sector. Our positive outlook is supported by several ! Project Helo - Provider of engine and helicopter parts to commercial
A380.
swalker@rsmequico.com industry dynamics that should insulate the A&D space from a broad economic and government customers (Southeast)
While the wiring issues cited by
downturn. A key driver of M&A over the ! Project Mesa - Manufacturer of watercraft for military special
Trevor T. Bohn Airbus have not surfaced, Boeing has
Vice President next several quarters will be the continued operations forces and seats for marine vessels and industrial vehicles
714.327.8624
had to manage longer-than-
strength of the commercial-build cycle.
A key driver of
(Northeast)
tbohn@rsmequico.com Image: Boeing
anticipated waiting times for
After several years of record-setting M&A over the next ! Project Optic - Producer of machine components for customers in the
replacement parts and revisions to
Erik G. Choy orders, the aerospace supply chain is several quarters electro-optics and aerospace industries (Northeast)
the plane's interior. A combination of increasing use of advanced composite materials and hesitancy by
Vice President
suppliers to re-invest in capital equipment has Boeing and Airbus struggling to work through their
poised to benefit from the long-term will be the ! Project Vessel - Manufacturer of specialized process equipment, control
714.327.8831
echoy@rsmequico.com record backlogs.
strength of an unprecedented cycle. continued strength systems, and custom manufacturing software operating within the
DOD Funding Complex on Several Platforms
On the defense side, optimism among of the commercial- aerospace, metal finishing and glass manufacturing industries (West)
www.rsmequico.com industry participants is slightly more build cycle.
The Defense Department's request for $515.4 billion for ! Project Corvette - Private placement of equity for very light jet
guarded, since defense spending is
the fiscal 2009 defense budget created several designer and producer (Northwest)
expected to peak in 2009 — regardless of
unanswered questions, particularly around the future of who is elected to the White House. RSM EquiCo expects M&A in the sector to ! Project CAST - International supplier of advanced composite aerospace
some major military aircraft programs, most notably the outperform the broader market, given these strong industry fundamentals. structures serving commercial aerospace satellite markets (Europe)
F-22 Raptor and the C-17 transport. For the F-22, the Further, while overall deal volume may decline given the financing challenges ! Project Array - Manufacturer of connectors for use in commercial and
budget's release has added to the confusion regarding facing many of the multi-billion dollar deals, an increasing number of under- military aircraft (Southeast)
its future, since there was no money allocated to $250 million transactions year-over-year will support the market.
terminate production or to fund future purchases. This
 In the News
action not only leaves a gap in next-generation fighter production (until the F- Airbus recently confirmed rumors that the pending sale of two of its sites
35 enters full-rate production), but it also effectively leaves the final decision (Varel and Augsburg) has been officially called off. Airbus Chief Executive
on the F-22 to the next Tom Enders said that, “a viable industrial and financial solution was not
administration. The future of achievable.” The failure of Airbus to
the C-17 is once again transform its supply chain illustrates
uncertain, since no funding several key issues surrounding today's Consolidation among
dollars were allocated to the A&D industry. tier 1 and tier 2
production line in Long Beach, Weakness in the U.S. dollar has pushed suppliers will happen
Calif. For the past several many fixed-rate dollar contracts into in the near-term as
years, Congress has filled the unprofitable terms for the European the supply chain
void with additional dollars in supply base. These multi-year, dollar- grapples with the
the supplemental budget. denominated agreements have left
Final decisions regarding these and other programs will have to be made, but
challenges of
many European suppliers struggling to
it appears they will be left to the next commander-in-chief. maintain minimal margins. The euro's
a weakening dollar.
strength relative to the dollar has
Recent M&A Transactions forced EADS to delay its “Power 8” plan, which was aimed at streamlining the
Airbus supply chain. RSM EquiCo believes that consolidation among tier 1 and
Date Target Value (US$mm) Buyer tier 2 suppliers will happen in the near-term as the supply chain grapples with
Pending Northrop Grumman $175 L-3 Communications the challenges of a weakening dollar.
(Electro Optical Systems)
Pending Sparta Inc. $416 Cobham plc Current RSM EquiCo Mandates
01/18/08 Tenix Defense Pty $682 BAE Systems plc
! Project Ripcord - International provider of devices for use in egress
01/31/08 SG Brown Ltd $55 Teledyne Ltd
systems in the military and commercial aerospace markets (Midwest)
02/2/08 EOIR Technologies $34 White Oak Group
Source: Capital IQ
! Project Volt - Provider of test and measuring equipment for frequency
control devices (Southwest)
M&A Outlook ! Project Plasma - Provider of sophisticated interconnect solutions
offering increased data and content throughput for specialty avionics
Despite a dynamic credit environment and an uncertain macroeconomic
applications (Northwest)
backdrop, we remain confident about the near-term prospects for M&A in the
aerospace and defense sector. Our positive outlook is supported by several ! Project Helo - Provider of engine and helicopter parts to commercial
industry dynamics that should insulate the A&D space from a broad economic and government customers (Southeast)
downturn. A key driver of M&A over the ! Project Mesa - Manufacturer of watercraft for military special
next several quarters will be the continued operations forces and seats for marine vessels and industrial vehicles
strength of the commercial-build cycle.
A key driver of
(Northeast)
After several years of record-setting M&A over the next ! Project Optic - Producer of machine components for customers in the
orders, the aerospace supply chain is several quarters electro-optics and aerospace industries (Northeast)
poised to benefit from the long-term will be the ! Project Vessel - Manufacturer of specialized process equipment, control
strength of an unprecedented cycle. continued strength systems, and custom manufacturing software operating within the
On the defense side, optimism among of the commercial- aerospace, metal finishing and glass manufacturing industries (West)
industry participants is slightly more build cycle. ! Project Corvette - Private placement of equity for very light jet
guarded, since defense spending is
designer and producer (Northwest)
expected to peak in 2009 — regardless of
who is elected to the White House. RSM EquiCo expects M&A in the sector to ! Project CAST - International supplier of advanced composite aerospace
outperform the broader market, given these strong industry fundamentals. structures serving commercial aerospace satellite markets (Europe)
Further, while overall deal volume may decline given the financing challenges ! Project Array - Manufacturer of connectors for use in commercial and
facing many of the multi-billion dollar deals, an increasing number of under- military aircraft (Southeast)
$250 million transactions year-over-year will support the market.
 Quarterly Industry Review

In this issue . . .
+ Key trends
+ M&A outlook
+ In the news
M&A . Divestitures . Capital Raising . Fairness Opinions . Recapitalizations
+ Current mandates
Costa Mesa . Chicago . Boston . New York . London
888.900.0411 . www.rsmequico.com
Member FINRA, SIPC.
Q1.2008
International mandates are handled by or in conjunction with RSM EquiCo Canada Inc. (limited market dealer registered with
the Ontario Securities Commission) or EquiCo Europe Ltd (authorized and regulated by the Financial Services Authority).
©2008 RSM EquiCo Capital Markets LLC