If you sell one of your businesses to a prime and you value it at 10 times revenue, the prime would have to immediately destroy 80% of the value of that company in order to subsume it into their business.
“And so typically on historically, primes have been very bad acquirers of early stage and even later stage startups in the space for exactly that reason.”
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you sell one of your businesses to a prime and you value it at 10 times revenue, and the prime would have to immediately destroy 80% of the value of that company in order to subsume it into their business. And so typically on historically, primes have been very bad acquirers of early stage and even later stage startups in the space for exactly that reason. I see that changing over the next few years. The two reasons. Firstly, we see the emergence of neo primes. So the likes of Anduril, of Helsing. We can also bucket TechAva and Quantum Systems into those. And they're gonna start to become, and in Anduril's case already, has become highly acquisitive.
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Reveals a shocking structural inefficiency in defense M&A with specific numbers (10x revenue, 80% value destruction). This counterintuitive business mechanic explains why traditional defense primes struggle with acquisitions.
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Nicola Sinclair
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