Quilty Analytics: Space Market Transactions Cool During 2022’s 1st Quarter

After a torrent of transaction activity during 2021, the first quarter of 2022 saw a downshift in announced deal volumes. In Q1 22, there were six space-related acquisitions and buyouts, 41 private equity and venture equity financings totaling approximately $1.5 billion in funds raised, and three public equity financings, inclusive of two pending de-SPACs, totaling approximately $800 million in gross proceeds.

Q1 22 M&A Review

Merger and acquisition activity was down markedly, with six announced transactions during Q1 22, compared to 13 in Q1 21 and 15 in the prior quarter.

Probably the largest transaction announced during the quarter was Blue Origin’s acquisition of Honeybee Robotics. The transaction represents a first for Blue Origin, which until now had pursued purely organic development of its business, though we think it is likely Blue Origin will acquire additional complementary capabilities over the next few years. Originally founded in 1983, Honeybee Robotics has extensive space robotics capability. It was acquired by Ensign-Bickford Industries in 2017 and made one tuck-in acquisition in 2019 before the recent sale.

Also notable, Spanish regional communications satellite operator Hispasat announced during the quarter its intent to acquire Spain-based satellite services provider Axess Networks for an enterprise value of $123.5 million. Axess Networks comprises the former Axesat and CETel businesses, which were acquired by Irish private equity firm Aksiom in 2019. Axess has an extensive footprint of satellite-managed network solutions across Latin America, Europe, the Middle East, and Africa. The transaction is part of Hispasat’s strategy defined in its 2020-2025 strategic plan. The acquisition of Axess Networks allows Hispasat to more closely reach customers as the broader satcom sector undergoes rapid change.

During the quarter, the other transactions announced included managed service provider Network Innovations’ acquisition of STS Global, a ground infrastructure solutions provider; HEICO subsidiary Lucix’s tuck-in of Flight Microwave, which builds high-power filters for space and defense applications; IGM-backed AEM’s acquisition of Renaissance Electronics & Communications, which builds radio frequency components; and Ergon Capital Partners’ acquisition of a majority stake in Satlink, which offers maritime solutions.

We continue to see healthy levels of merger and acquisition evaluation activity in the markets. Anecdotally, buyer interest remains very high, though perhaps not “overheated” as it arguably was during parts of 2021. So far, the increased volatility of the public equity markets has had a fairly limited dampening effect on buyer appetite to conduct mergers and acquisitions in general, other than within parts of the de-SPAC company universe. These observations suggest that the downshift in Q1 22 merger and acquisition volume is likely the result of timing and one-off factors combined with a return to a lower and more sustainable level of dealmaking activity. These trends are also fairly representative of broader technology sector trends during the quarter. The evolving macroeconomic environment remains the biggest wildcard that could markedly shift sentiment during the balance of the year.

Q1 22 Equity Financing Activity Review

Equity financing activity remained vibrant during the first quarter, with 41 transactions, compared to 61 in the prior quarter and 51 in the prior Q1.

Six private financing transactions raised at least $100 million during the quarter: Galactic Energy, Satellogic, Iceye, Celestia Aerospace, Hermeus, and Synspective. While we generally define the satellite and space sector fairly strictly for purposes of our transaction analyses, we did include two companies this quarter, Hermeus and Destinus, involved in hypersonics, which is slightly outside our usual definition. Five of these issuers raising are Western-oriented, while Galactic Energy is a Chinese private launch startup that first achieved successful on-orbit satellite deployment in late 2021. More broadly, enablement and Earth observation and geospatial were the most active sub-segments for private financing activity in the first quarter, with 24 and eight equity financings, respectively.

Satellogic successfully closed on a $150 million equity investment from Liberty Strategic Capital, the firm of the former U.S. Treasury Secretary Steven Mnuchin, helping to facilitate the close of Satellogic’s de-SPAC transaction in late January. Satellogic subsequently launched an additional five Earth observation satellites in April on the recent SpaceX Transporter-4 mission, bringing it to 22 satellites on orbit, with the latest batch including a next-generation Satellogic “Mark-V” spacecraft design.

Celestia Aerospace raised a €100 million ($109 million) round, which it deemed a seed round, making it a “mega-seed” financing. The financing was by Invema Group Ltd., a multinational finance group. Celestia describes itself as an orbital solutions company that aims to offer a fully vertically integrated solution for nanosatellite production and operation for Earth observation and communications. The production plant, planned in Spain, will apply lean-manufacturing concepts from the automotive industry and targets production capacity of up to 100 units per year.

Also in the quarter, there were two larger synthetic aperture radar (SAR) operator financings: Iceye’s $136 million Series D financing and Synspective’s $100 million Series B. These larger SmallSat SAR financings were joined by downstream SAR analytics company Ursa’s $16 million Series C equity financing announced in March. The SAR imaging markets are experiencing a resurgence of interest, which will likely be amplified by renewed focus on satellite imaging technologies in the wake of the ongoing Russia-Ukraine war.

There were three public equity transactions during the quarter, down from recent quarters due to general pullback of de-SPAC activity as well as more volatile public equity markets.

There were two new de-SPAC transactions announced during Q1 22: SatixFy, which offers satcom chips and advanced ground technologies, and D-Orbit, which provides in-space transportation. Meanwhile, satellite weather forecaster Tomorrow.io’s de-SPAC transaction was terminated during the quarter. While we are aware of a few SPAC tie-ups under consideration, in general, we believe that the “year of the SPAC” has now ended, and we expect future de-SPAC transaction announcements to be few and far between.

 

 

 

 

 

 

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