Arsenal of Democracy: TransDigm Acquires Raptor Scientific

As the U.S. Department of Defense seeks to modernize the nation’s defense industrial ecosystem, TransDigm Group announced its $655 million acquisition of Raptor Scientific. The two aerospace and defense companies intend to combine their workforces across the U.S. and Canada in an all-cash deal, according to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions. 

“The Company’s comprehensive proprietary and highly engineered product portfolio of aerospace and defense testing and instrumentation solutions fits well with our value generation strategy,” Kevin Stein, TransDigm President and CEO, states in the deal’s press release. “Raptor Scientifics test and measurement solutions are used on a diverse range of new and existing aircraft platforms.”

The Covid-19 pandemic exposed vulnerabilities in the global supply chain. Closed borders, shipping delays, processing queues, employee shortages, and political strife exposed difficulties in the geographically-dispersed operations that supply everything from paper towels to automobiles. As discussed by Tom Hagy, pressures on the global supply chain have continued to mount. 

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Source: World Economic Forum

Overlayed with these supply chain vulnerabilities is significantly increased demand in the defense space, in particular. As reported in this column, major ongoing conflicts in Ukraine, the Middle East, and across the globe drove military expenditures up 6.8% in 2023, to reach an all-time high of over $2.4 trillion globally. This represents the largest increase since 2009, with the ten largest spenders all increasing their spending last year, led by the United States, China, and Russia. 

Just because the funding is there, however, it does not necessarily mean the weapons can be produced quickly enough. For example, as the U.S. and its European allies supplied arms to Ukraine following Russia’s invasion in 2022, the West had difficulties producing enough to keep up with the surge in demand. 

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Source: Economist

To combat these challenges to national security, the U.S. Department of Defense (DOD) released its first ever national defense industrial strategy that seeks to “catalyze generational change from the existing defense industrial base to a more robust, resilient, and dynamic modernized defense industrial ecosystem.”

In the report, the DOD recognizes the need for the nation’s industrial base to change to better provide at the speed and scale necessary for modern warfare. “[T]he strategy recognizes the “valley of death,” the often-prolonged journey a capability takes from the government’s pilot stage to widespread adoption, as a lingering barrier to innovation adoption,” according to the Atlantic Council think tank. “The report continues by diagnosing the poor health of the US industrial base, including as a result of critical workforce shortages in the fields of science, technology, engineering, and mathematics (STEM) and advanced manufacturing. It also notes the dangers of fragile supply chains, espionage, and unfair trade practices, as well as the problem of insufficient economic deterrence to counteract foreign investment jeopardizing national security.” 

TransDigm and Raptor Scientific hope to play key roles in such modernization.