Investing in Space: Bankers and insiders say M&A action is heating up

Investing in Space: Bankers and insiders say M&A action is heating up

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In this article

CNBC's Investing in Space newsletter offers a view into the business of space exploration and privatization, delivered straight to your inbox. CNBC's Michael Sheetz reports and curates the latest news, investor updates and exclusive interviews on the most important companies reaching new heights. Sign up to receive future editions.

The space sector has seen a variety of mergers and acquisitions since the start of the year, but the deal-making is only heating up.

This week I spoke to bankers, private equity partners and investors to get a candid health check on M&A activity in the industry, and the consensus was fairly unanimous. As one financier said: The dominoes are starting to fall.

This is a normal market cycle, a second financier said, and the pendulum is swinging toward a shakeout: A lot of those weaker companies fail, and there's a lot of consolidation.

We're early into the process of reckoning actual demand versus hype, a third said.

Most people I talked to expect that – absent an unexpected and dramatic swing in macroeconomic conditions – this period of companies selling or failing will last the next 12 months. CNBC agreed to keep their identities anonymous so they could talk freely about non-public discussions and sentiments.

A lot of these sort of startup companies that have been around for the last few years will see the wall in front of them and likely sell ahead of that, another financier said.

On the top end of the M&A market, multiple bankers told me that United Launch Alliance — the joint venture between Lockheed Martin and Boeing — continues to be shopped around, as has been reported, while packaging giant Ball is looking to sell off its aerospace subsidiary. ULA referred my request for comment on the sale process to Boeing and Lockheed. A Ball Aerospace spokesperson declined to comment.

Meanwhile, one financier told me even Boeing is exploring options for its space business, and everything's on the table. The person, who had knowledge of the conversations, told me no hard decisions have been made yet regarding what the company may do with its space portfolio, but it could potentially divest or sell its satellite manufacturing unit. Boeing did not respond to my request for comment.

An important nuance emphasized by many during my conversations: these deals, whether they're worth millions or billions, are not all equal. The markets and underlying technologies of space companies are often very different, and the reasons why one company sells or fails are often just as different from that of another.

Likewise for buyers, who may go after a deal because they're chasing a deep discount, looking to quickly add talent in a key area, adding complementary services or technology, or any other number of incentives.

This is an incredible opportunity … if you've been doing all the hard work through the market frenzy and you've been building a business on sound unit economics … now is the time to move, one person told me. You can really clean up.

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