top of page

L3Harris acquires Viasat's Tactical Data Link for $2bn

Updated: Oct 30, 2023



Acquisition Overview


L3Harris Technologies, a global aerospace and defence technology innovator, announced the completion of its acquisition of Viasat's Tactical Data Links (TDL) product line in January 2023. The product line, commonly known as Link 16, was acquired for approximately $1.96 billion, subject to customary adjustments. The deal was signed in October 2022, and U.S. and allied partner regulatory approvals were secured in December 2022. The acquisition of the TDL network is expected to enable L3Harris to expand its offerings in the space, air, land, sea, and cyber domains.


Deal Structure


L3Harris Technologies acquired Viasat's Tactical Data Links product line for approximately $1.96 billion in cash, subject to customary adjustments. Viasat's TDL product line generated approximately $275 million in revenue in 2022. The deal was structured as an asset purchase, with L3Harris acquiring intellectual property, technology, inventory, and other assets related to the TDL product line. L3Harris funded the transaction through a combination of cash on hand and existing credit facilities.


L3 Harris Technologies Overview


L3Harris Technologies is an agile global aerospace and defence technology innovator that delivers end-to-end solutions to meet customers' mission-critical needs. The company provides advanced technologies across space, air, land, sea, and cyber domains. L3Harris was formed through the merger of L3 Technologies and Harris Corporation in June 2019, creating one of the largest defence technology companies in the world. The company has approximately 48,000 employees and serves customers in over 100 countries.


Founded: 2019


Employees: 48,000


EV: $44.69bn


LTM Revenue: $17.06bn


LTM EBITDA: $2.87bn


Market Cap: $37.78bn


Viasat Inc. Overview


Viasat Inc. is a global communications company that provides high-speed satellite broadband services and secure networking systems to military, commercial, and residential customers. The company operates in three business segments: satellite services, government systems, and commercial networks. The Tactical Data Links product line, commonly known as Link 16, is a part of the government systems segment. Viasat is headquartered in Carlsbad, California, and has approximately 6,200 employees worldwide.

Founded: 1986


Employees: 7,000


EV: $5.76bn


LTM Revenue: $2.87bn


LTM EBITDA: $ 462.91mn


Market Cap: $2.67bn


Industry Insight


The global aerospace and defence market is expected to grow at a compound annual growth rate (CAGR) of 4.7% from 2021 to 2028, reaching $1.6 trillion by 2028. The market is being driven by increasing defence spending, technological advancements, and growing geopolitical tensions. The space domain is expected to be a major growth area, with increased demand for satellite-based services and technologies.


In addition to the growing demand for satellite-based services and technologies, the aerospace and defence industry is also expected to experience significant growth in the commercial aviation sector. With an increasing global population and a rising middle class, air travel has become more accessible and affordable. This has led to an increase in demand for air transportation, which in turn has fuelled the growth of the commercial aviation industry.


Technological advancements are also playing a significant role in the growth of the aerospace and defence market. The development of new materials, such as composites, is enabling the production of lighter and more fuel-efficient aircraft. Advances in avionics and other electronics are improving the safety and efficiency of air travel. Meanwhile, the increasing use of unmanned aerial vehicles (UAVs) in military and civilian applications is opening up new opportunities for growth in the defence and aerospace sectors.


Another factor driving growth in the aerospace and defence industry is the increasing focus on sustainability. The aviation industry is one of the largest contributors to global carbon emissions, and there is a growing demand for more environmentally friendly technologies and practices. This is leading to the development of new aircraft designs, alternative fuels, and other innovations aimed at reducing the environmental impact of air travel.


Despite the many opportunities for growth in the aerospace and defence market, there are also several challenges that must be addressed. One of the biggest challenges facing the industry is the shortage of skilled workers. With an aging workforce and a limited pool of qualified candidates, companies are struggling to find the talent they need to keep up with demand.


Another challenge facing the industry is the increasing competition from emerging markets. Countries such as China, India, and Russia are investing heavily in their aerospace and defence industries and are beginning to challenge the dominance of established players in the market.


The aerospace and defence market are poised for significant growth in the coming years, driven by a range of factors including increasing defence spending, technological advancements, and growing demand for air travel and satellite-based services. However, companies in the industry will need to address several challenges, including the shortage of skilled workers and the increasing competition from emerging markets, in order to take full advantage of the opportunities presented by this dynamic and rapidly evolving market.


Strategic Rationale


The acquisition of Viasat's Tactical Data Links product line is expected to enhance L3Harris' capabilities in the defence industry, particularly in the areas of intelligence, surveillance, and reconnaissance (ISR) and command and control (C2). Link 16 is a key technology used by militaries around the world to enable secure communication and data sharing between airborne, land-based, and naval platforms. The acquisition is expected to strengthen L3Harris' position as a leading provider of TDL solutions and expand its addressable market.


Furthermore, the increasing adoption of unmanned aerial vehicles (UAVs) and other autonomous systems by militaries worldwide is also driving growth in the ISR and C2 markets. These systems require robust TDL capabilities to enable secure communication and coordination with other platforms and ground stations. With the acquisition of Viasat's TDL product line, L3Harris is well-positioned to capitalize on this trend and offer integrated solutions for customers' mission-critical needs.


In addition, the acquisition is expected to generate cost synergies and operational efficiencies for L3Harris, as the company will benefit from Viasat's engineering expertise and production capabilities. The transaction also includes a multi-year supply agreement for Viasat to provide L3Harris with components and subsystems, further strengthening the companies' partnership.


Overall, L3Harris' acquisition of Viasat's Tactical Data Links product line represents a strategic move to expand its capabilities and market presence in the growing defence industry. The integration of Viasat's TDL solutions into L3Harris' portfolio is expected to drive revenue growth and create value for shareholders in the long term.


Long-term Prospects


The acquisition of Viasat's Tactical Data Links product line is expected to be accretive to L3Harris' earnings in the first year and generate annual cost synergies of approximately $25 million by the third year. The acquisition is also expected to be a significant contributor to L3Harris' free cash flow generation. As a leading provider of TDL solutions, L3Harris is well positioned to benefit from the growing demand for secure communication and data sharing technologies in the defence industry. The company's strong balance sheet and global reach should enable it to pursue additional strategic acquisitions and investments to drive long term growth.


The acquisition of Viasat's Tactical Data Links product line is also expected to provide L3Harris with several long-term benefits. The addition of Link 16 technology to L3Harris' existing portfolio of TDL solutions should enhance the company's ability to provide end-to end solutions for the defence industry, particularly in the areas of ISR and C2. This should help the company to expand its addressable market and capture a larger share of defence spending.


In addition, the acquisition is expected to generate annual cost synergies of approximately $25 million by the third year, which should improve L3Harris' profitability over the long term. This, combined with the expected increase in free cash flow generation, should enable the company to pursue additional strategic acquisitions and investments to further drive long-term growth.


The growing demand for secure communication and data sharing technologies in the defence industry is expected to provide a long-term growth opportunity for L3Harris. The company's leading position in the TDL solutions market, strong balance sheet, and global reach should enable it to capitalize on this trend and continue to expand its market share over the long term.


The space domain is expected to be a major growth area, with increased demand for satellite based services and technologies. As a leading provider of defence and space solutions, L3Harris is well-positioned to benefit from these trends and capture a larger share of the market over the long term.


In conclusion, the acquisition of Viasat's Tactical Data Links product line is expected to provide L3Harris with a strong foundation for long-term growth in the defence and space industries. The company's leading position in the TDL solutions market, combined with its strong balance sheet, global reach, and ability to pursue additional strategic acquisitions and investments, should enable it to capture a larger share of the growing market and drive long-term shareholder value.


Written by Tushar Malhotra (London School of Economics and Political Science).


Recent Posts

See All

Mars’ $662m acquisition of Hotel Chocolat

Acquisition Overview American multinational manufacturer of confectionery, pet food, and other food products, Mars, Incorporated, has confirmed the acquisition of Hotel Chocolat Limited, a luxury Brit

Comments


bottom of page