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Hudson Fairfax Group's investment strategy revolves around three fundamental trends that are transforming the defense security sector; consolidation and reorganization brought about by budgetary changes; new company creation arising from next generation technologies; and growth in emerging markets, particularly India.
Consolidation & Reorganization
Budgetary constraints in the United States are leading to a decline in overall defense spending, causing a fundamental reorganization of the industry. Reduced budgets are spurring accelerated industry consolidation & reorganization. Unique to this next phase, the industry will further divide into winners and those that are merged away. The industry is already witnessing a renewed level of mergers & acquisitions activity, a trend we expect to increase greatly over the coming year.
- Minority investments in growth sectors
- Acquisitions & roll-ups in fragmented supply chains
- Divestitures of non-core assets
Next Generation Technologies
The decline in overall defense budget is overshadowing a shift towards new growth sectors & technologies that will transform the U.S. military to a lighter, more mobile and network-centric force.
This shift in defense spending is driven in part by a variety of new threats from cyber-attacks and terrorism to organized crime.
- Series C Venture or Earlier stage PE investment in new companies
- Growth capital in rapidly expanding companies
- Acquisitions of established companies in well-funded sectors of defense budget
Emerging Market Growth
While the United States and Europe are experiencing budget declines, most emerging markets are increasing their defense spending, in line with their high economic growth. India represents a particularly promising new area of growth for the U.S. defense sector. The country is the world’s largest democracy, has the second fastest growing economy and operates the third largest military. We are one of the few investment firms that has expertise in Indian defense. We have a heritage of investing in the country and some of our Partners are part of the U.S. – India defense policy dialog.
- Co-investment with U.S. defense majors entering Indian industry
- Minority investment in companies that are acquisition targets for U.S. companies seeking to meet offset obligations
- Joint ventures with Indian companies supplying the U.S. market
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