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3Wire Advises AE Industrial-Backed AMPAC on its $700 million Acquisition by NewMarket

January 18, 2024

3Wire Partners is pleased to announce that it has advised AE Industrial Partners and its portfolio company American Pacific Corporation (AMPAC) on its sale to NewMarket Corporation (NYSE: NEU) for approximately $700 million. The transaction, initially announced on December 4, 2023, closed on January 16, 2024.


Happy New Year to our partners, friends, and industry colleagues! This inaugural letter from 3Wire Partners follows an extraordinarily momentous year for the industrial base and our firm. Before sharing some of our updates as a new firm, a few words on the 2023 context surrounding its creation.

Quantitative Wrap-up of 2023

Since we started 3Wire and for the 2023 calendar year:

Another 280 M&A transactions were announced across the aerospace, defense, and government (ADG) sectors. This may seem low compared to the extraordinary volume of 464 and 391 deals in each of 2021 and 2022, but it matches the pre-Covid average of about 250 deals per year from 2010 to 2020.
U.S. ADG M&A Deals, 2023
Deals, 2021
Deals, 2022
Sponsor M&A Activity as % of total, 2023
Private equity sponsor activity in the sector decelerated less, even in the face of the highest interest rate environment since 2001, with 60% of all M&A activity being led by financial sponsors versus a 5-year average of 50%.
Total shareholder returns of public companies in the aggregate ADG sector of 21% meaningfully outpaced their own 10-year average of 12% but were just below the S&P of 26%, with the Aerospace index outperforming at 29%.
YoY EV / EBITDA Valuation Change, 2023
M&A valuations in the sector haven’t dramatically moved in 2023; average valuations have hovered around 13x EBITDA for disclosed transactions and slightly lower for undisclosed transactions, in part due to a smaller average transaction size.

Qualitative Developments in 2023

Armed conflicts in Ukraine and the Middle East this past year reinforced the critical roles of both new and old technology in modern conflict.

Ukraine spotlighted the very same technologies being adopted across consumer economies – artificial intelligence-driven models, Starlink mobile satellite-based internet service, inexpensive drones, and phone-based apps for crowdsourcing everything from military intelligence to recruitment to refugee relocation and support. Their widespread availability in the hands of an educated, tech-savvy, and passionately motivated populace unveils a different view of modern warfare and civic services.
Meanwhile, the massive consumption of basic munitions and artillery, personnel armor, and other “old economy” manufactured equipment revealed the degree to which our highly consolidated and transformed industrial base lacks the adaptability to replenish stocks rapidly. As a result, greater attention has been placed on our national security supply chain's readiness, capacity, and security.

Investing in 2024

The outlook for 2024 ADG investing is multi-faceted – not limited to the cash-flow-driven buy-out strategies of the 1990s or the high-profile venture investors who have spotlighted successes like Palantir and SpaceX. It is “all of the above,” compounded by the unique mission requirements of its customers (often guarded by government classification), the complexity of contracting regulations, the contradiction of long-term contracts that remain subject to annual Congressional funding actions, and a new phenomenon of ESG concerns imposed on lenders and investors.

The robust diversity of the U.S. capital markets, which underpins the innovative and globally competitive technical sector, remains the most valuable weapon in our government’s arsenal. However, investing in the ADG sector demands a level of industry specialization that is not categorized by short- versus long-term holds, company size, or whether the company employs cutting-edge AI or the cutting tools of a manufacturing floor.

Success for investors in the sector is strongly correlated to having a team with the knowledge, network, and experience to access markets and align capital with the unique needs and opportunities of customers and owners alike.

3Wire Update, Looking Ahead

We established 3Wire to address the highly specialized and complex capital needs of the industrial base. Focusing on the aerospace, defense, and government services sectors, we aim to be a crucial partner and catalyst to founders, company owners, and capital sources for companies of national importance. By harnessing our extensive transaction experience, industry network, and partnership-focused approach, we are positioned to improve strategic planning for founders, companies, and investors while helping to ensure a strong national security position through a well-capitalized defense industrial base.

We are happy to share that in our first year of operation, we have seen this approach already gain strong traction in the marketplace –

From partnering with investors in businesses with scalable technology and talent for such customer needs, including:

Cadmus solving the most difficult environmental, energy, and development challenges
Digital Harmonic leading the image enhancement and signal-processing revolution
Parry Labs redefining the future of open systems edge computing for the modern battlespace

To advising investors in exiting well-positioned businesses at both ends of the “old” and “new” spectrum described above, including:

Advised on the $700 million sale of AE Industrial-backed American Pacific Corporation (AMPAC), the leading U.S. manufacturer of ammonium perchlorate for solid rocket motors since the dawn of ballistic technology, to NewMarket Corporation, a public company run by a long-standing American family owner of businesses in the chemicals sector. This transaction marks the third sale of AMPAC advised by 3Wire professionals.
Advised on the announced sale of Aerovel to Airbus. Aerovel is an innovative developer of unmanned aerial systems (UAS) used for intelligence, surveillance, target acquisition, and reconnaissance (ISTAR) missions at sea and over land. The company was founded by Tad McGeer. The 3Wire team also advised on the sale of Insitu, a prior company founded by Dr. McGeer, on its sale to Boeing in 2008.

As we unpack in our new offices at 1717 Pennsylvania Avenue NW in Washington, D.C., we reflect on the incredible potential and opportunity awaiting in the new year. 3Wire is uniquely positioned to be a vital conduit of strategic capital and advice within the ADG industrial base and partner to those motivated by the double bottom line of investing in the national security sector. We look forward to connecting with you in the coming months and discussing the many opportunities to invest in this critical industry. More to come.

Notes: Total shareholder return (TSR) presented with equally weighted constituents, except S&P 500; S&P 500 TSR includes dividends; ADG index constituents: AAR, Airbus, AMETEK, Astronics, Barnes Group, Boeing, Bombardier, Booz Allen Hamilton, BWX Technologies, CACI International, Curtiss-Wright, Ducommun, ESCO Technologies, General Dynamics, HEICO, Hexcel, Honeywell International, Huntington Ingalls Industries, ITT, Jacobs Solutions, Kaman, KBR, Kratos Defense & Security Solutions, L3Harris Technologies, Leidos, Lockheed Martin, Mercury Systems, Moog, Northrop Grumman, Parker-Hannifin, RTX, SAIC, Spirit AeroSystems, Teledyne Technologies, Textron, TransDigm, and Triumph.

Source: 3Wire Proprietary; S&P Capital IQ; Various Industry Sources.

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