The Command, Control, Communications, Computers, Intelligence, Surveillance & Reconnaissance (C4ISR) sector merger and acquisition (M&A) market experienced a year-over-year (YOY) decline in transaction volume in 2023, in line with broader dealmaking trends. A widespread slowdown in activity among sponsors curtailed both deal volume and value across the board in 2023. In the Federal marketplace, four Continuing Resolutions passed by Congress since the beginning of fiscal year (FY) 2024 (October 1, 2023) have delayed the start of new Department of Defense (DOD) programs while disrupting lucrative contract processes. Comparatively, Congress passed the Omnibus Appropriations Bill for FY 2023 in December of 2022, effectively funding the DOD before the new year. Despite the headwinds to M&A, heightened demand from government customers for artificial intelligence (AI)- and machine learning (ML)-integrated C4ISR technologies is expected to provide a boon to dealmaking in the sector. Demand has been bolstered by the White House’s executive order on “Safe, Secure, and Trustworthy AI,” which developed a National Security Memorandum on AI. The memorandum “ensures that the U.S. military and intelligence community use AI safely, ethically, and effectively in their missions, and will direct actions to counter adversaries’ military use of AI,” according to a press release.1 Research and development (R&D) investment in this space has also coincided with equity market fervor for AI-driven products, solidifying demand in the near-term. While the timeliness of budget procedures continues to be a challenge for Aerospace, Defense, Government & Security (ADGS) industry participants, AI/ML integration into the C4ISR landscape is anticipated to be one of the leading drivers of growth and a resurgence in sector dealmaking…
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