H&A discusses site selection in Europe

Hickey - Latvia - Outsourcing Summit
David Hickey, H&A’s Senior Director of Europe, speaking at an outsourcing summit in Riga, Latvia

David Hickey, H&A’s Senior Director of Europe, led a TED-style discussion on site selection dynamics in Eastern Europe at a conference in Riga, Latvia. The event, which was co-hosted by the National Outsourcing Association and the Investment and Development Agency of Latvia, focused primarily on outsourcing and shared services and was attended by key business leaders and government representatives from around Europe.

H&A releases newest installment of their Legislative and Incentive Update

Hickey & Associates released their H&A Legislative and Incentive Update – Fall 2014, a comprehensive review of US state legislative activities related to business incentives, tax credits, and economic development policies during the 3rd quarter of 2014.

In the new report, H&A experts provide insight on policy updates and changes in the following states:

  • California
  • Nevada
  • Connecticut
  • New York
  • Indiana
  • North Carolina
  • Maine Ohio
  • Maryland
  • Pennsylvania
  • Massachusetts
  • Wisconsin

Following the brief presentation, the H&A experts will open up the webinar for an extensive question and answer session with participants for more detailed policy insight. To register for the webinar on Thursday, October 30th at 1:00 PM ET, please click on the following link: Register Here.Please join H&A experts for a complimentary webinar covering the many new programs and policies covered in the H&A Legislative and Incentive Update – Fall 2014. Participants will have an opportunity to learn more about changes and trends in laws and policies as many U.S. state legislatures continue to deliberate through the year. As companies consider their next business location decision, it is critical to be knowledgeable of the changes and the trends at the state and local level. These new policies and statutes could offer a number of funding opportunities through public incentives and dynamic economic development policies, while also presenting new challenges for the government relations team to navigate going forward.

To access a complimentary copy of the H&A Legislative and Incentive Update – Fall 2014, please click on the following link: Download the complimentary report.

State of Ohio announces funding for incumbent job training program

In today’s global economy, many states are doing more to help their workforce remain competitive. In a world where the pool of highly skilled workers continues to shrink, these states recognize that competitive employees must possess the best and most advanced skills possible. To address these needs, states like Ohio have developed training grant programs to stimulate worker skills development by assisting companies to offset some of the costs associated with training.

The Ohio Incumbent Workforce Training Voucher Program (IWTVP) is a competitive grant scheme that reimburses up to $4,000 in job training costs per employee for up to $250,000 in total to a company in an individual award. This funding can be used to reimburse training conducted in-house, by third party training providers, or for tuition reimbursement through schools of higher learning.

WHAT

The State of Ohio has announced a new round of training reimbursement for workers at qualifying industries.

WHO IS ELIGIBLE

Full-time employees working in the fields of manufacturing, financial services, energy, food processing, IT, or back office operations.

GRANT REIMBURSEMENT

50% of training costs, up to a maximum of $4,000 per employee and/or up to $250,000 per company.

TRAINING PERIOD

Training conducted from August 1, 2014 through December 31, 2015.

WHO CAN PROVIDE TRAINING

Training can be provided by in-house trainers, third party companies, or institutions of higher learning.

APPLICATION PERIOD

Applications will be accepted on a first come, first served bases beginning September 30 and continuing until the total funding amount of $29.4M has been allocated.

For more information on the funding announcement, please download the H&A report: Download the complimentary report.

Jason Hickey set to speak at state and local government relations conference

Jason Hickey, President of H&A, is set to be a key speaker at the State & Local Government Relations Conference next week. Hosted by the Public Affairs Council, this year’s event will bring together leaders in government relations leaders from the state and local levels. Being held at the Hilton Old Town Alexandria in Alexandria, VA, the conference will provide participants with an extensive dialogue and interchange on a variety of issues facing the government relations industry today, including local-level lobbying, navigation of the economic incentive process, working in the regulatory realm, and coalition and alliance management, among a number of other pertinent topics.

Hickey, often recognized as a global leader in public incentive advisory, will be alongside Lee Anderson, Director, State and Local Government Relations for General Mills, on a panel titled, “Bringing in the Business: Exploring Economic Incentives.” During this interactive discussion, Hickey and Anderson will guide conference attendees through the economic incentives process and present several best practices, including how to form a strong internal structure and team, identify the critical stakeholders at the state level, and develop effective messaging for state and local leaders. The panel is scheduled to be held at 11:00 AM EDT on Tuesday, September 30th.

For more information on the event, please visit the conference website: State & Local Government Relations Conference Website.

H&A experts featured at national tax conference on incentives

Terry Hansen, an H&A Principal, and Evan Rice, H&A’s General Counsel, are both featured speakers this week at the Institute of Professional in Taxation (IPT) Credits and Incentives Symposium.  Being held at the Crystal Gateway Marriott in Arlington, VA, the conference brings together experienced leaders and professionals from around the country to discuss the issues, and opportunities, presented by tax credits and incentives.  Over two-and-half days, participants will learn and explore best practices to assist in the procurement and administration of public incentives.
IPT C&I
Hansen and Rice, both global leaders in the area of Credits and Incentives, and frequent IPT contributors, will be leading panels during the event.  On Tuesday, Hansen will be speaking at a breakout session titled, “Workforce Development and Training Incentives.”  The following day, Rice will be leading a panel titled, “Constitutionality and Lobbying Rules.”

For more information on the event, please visit the IPT website: IPT 2014 Credits and Incentives Symposium

H&A Principal discusses economic development in Cincinnati

In a recent article featured in the Cincinnati Enquirer, H&A’s Terry Hansen speaks about the opportunities and challenges facing the city today. Participating in a site familiarization tour hosted by REDI Cincinnati, Hansen discussed his insights on what he witnessed first-hand during his visit to the region. Following decades in the leadership of IBM’s site location and workforce development operations, Hansen is now a Principal with H&A based in the firm’s Washington DC office.

The full article is below. To view the article on the Cincinnati Enquirer website, please click the following link: Cincinnati ‘exceeded my expectations’.

 

Cincinnati ‘exceeded my expectations’
Jason Williams, jwilliams@enquirer.com
8:32 a.m. EDT August 16, 2014
Cincinatti.com

The region may be better positioned for another General Electric-like deal after top local leaders worked this week to impress a group of jobs-creating consultants from across the U.S.

Six consultants who scout cities for companies looking to relocate and create jobs saw what local leaders have been saying for years: The region is poised for growth.

“I’ve heard a lot of good things about Cincinnati, but I wanted to see for myself,” said Terry Hansen, the Washington, D.C.-based principal of Hickey & Associates, a global site selection and public incentives firm.

“You certainly exceeded my expectations. If a client says to me, ‘I need something in mid-America.’ I’m going to ask: ‘Have you considered Cincinnati, Ohio?’”

REDI Cincinnati, the region’s new economic development initiative, introduced site selectors to top business executives from Procter & Gamble, Duke Energy and nearly 30 other regional companies and agencies. The site selectors also attended private events with Cincinnati Mayor John Cranley and Hamilton County officials and toured key neighborhoods and buildings over three days this week.

Site selectors scout out real estate locations, business environments and livability factors for companies looking to relocate. A site selector, for example, was behind helping General Electric pick Cincinnati this summer to build its new U.S. Global Operations Center at The Banks.

The site selectors were in town for the American Chamber of Commerce Executives convention, but REDI’s events were separate. Cities often invite site selectors for non-project-specific, show-and-tell visits. Hansen said he receives one to two invitations a week from cities across the world, but he takes only about five such trips a year.

“To get this number of decision-makers in your community at one time and showcase your assets is highly unusual,” said Johnna Reeder, president and CEO of REDI. “They have the influence to bring thousands of jobs to a region based on their feedback (to companies).”

She added: “I had a site selector say to me she felt a buzz here that she didn’t feel the last time she was in the region many years ago.”

Hansen was the only site selector who agreed to an interview with The Enquirer. He previously spent decades with IBM in workforce development and helping the company open offices across the U.S. Today, he focuses mostly on helping companies looking to relocate IT, biotech and advanced manufacturing jobs. It was his first trip to Cincinnati in which he spent significant time.

Here are his takeaways from Cincinnati:

What the region can promote

• Fundamentals: Cincinnati’s location in the Midwest provides good access to the rest of the nation, and its cost of living is “attractive,” Hansen said. He also cited the region’s skilled workforce and several universities, including the University of Cincinnati’s medical school. “You have that body of skills, and when my clients are looking for a new location, that’s first and foremost.”

• Urban core development: “I can see three cranes going from my hotel. (Downtown’s renaissance) shows the business community is committed. You’ve had some problems, and you’re trying to rectify them.”

He continued: “I can look a lot of metrics up online without visiting a place. But when you actually go out and meet the people, you find out whether they’re really committed or just going through the motions. You can see they’re committed here and want to make this a success. I think my colleagues here with me would say the same thing.”

• Transportation infrastructure and options: Hansen noticed traffic on Interstates 71 and 75 moving well during rush hour. He likes that rideshare companies Uber and Lyft are operating here, and that the streetcar is being built Downtown – good selling points in attracting recent college graduates and young talent.

What needs to improve

• Statewide employee training: The state offers employers up to $250,000 in grant money each year to train workers. That’s critical to economic development because finding properly skilled employees is an ongoing issue across many industries, leaders say.

“The administration of that program is atrocious, one of the worst in the country,” Hansen said. “The application process, the compliance. It requires paper records, and people don’t use paper records anymore. It is so bureaucratic. It’s a reputation other site selection people recognize about Ohio.”

• Luxury hotel: “With nine Fortune 500 companies – and lots of executives coming to town – I’m surprised there’s not one or two high-end hotels here,” Hansen said. “You could use a Ritz-Carlton, Waldorf Astoria or J.W. Marriott.”

• Downtown grocery store: “With the efforts to attract young people to Downtown and Over-the-Rhine, you’d like to see a Whole Foods or Trader Joe’s.”

What the city showed selectors

REDI and other officials showed off these local assets:

• Great American Tower at Queen City Square: Top business leaders tout the region’s tallest building as a centerpiece of Cincinnati’s Central Business District’s economic renaissance. The $320 million, 41-story tower opened in January 2011 and was built during the height of the recession. It’s 91 percent occupied, including housing the headquarters of Great American Insurance, a Fortune 500 company.

Prime space remains available in the 800,000 square-foot building. Economic development leaders like to showcase that one of the tower’s top floors – which includes a majestic 360-degree view – remains available for lease. Western & Southern CEO John Barrett says it would be ideal for a company to locate its executive offices in the tower and establish back-office operations near Cincinnati/Northern Kentucky International Airport or another regional suburb.

Reeder’s take: “We took them to an unfinished floor, and then we took them to a finished floor at Frost Brown Todd and showed them what can be done there. We have an image that we want to portray, and the tower provides a 360-degree view of the region.”

• General Electric’s new site: Local leaders are riding the momentum of GE’s announcing that it is bringing up to 2,000 new jobs and building a $90 million operations center at The Banks. It’s the type of back-office operations center for which Cincinnati and other U.S. urban areas have been bypassed for several years for more spacious, parking-friendly suburban locations.

Downtown beat out two suburban sites in Greater Cincinnati, giving The Banks its first major office facility. The Wall Street Journal said GE’s move is “the latest sign that urban centers in the Rust Belt are becoming more attractive to U.S. corporations.”

Reeder’s take: “I cannot say enough about how we’re leveraging that, but it’s time for us to chart the new GE.”

• Washington Park: The $48 million park makeover has been the cornerstone of near-Downtown residential redevelopment – a catalyst for luring new residents and visitors to once-downtrodden Over-the-Rhine. The park opened in July 2012 and has hosted everything from concerts to kickball tournaments to yoga classes, marking a new day for a site once renowned for drug deals and prostitution.

Some questioned whether a redeveloped park would be enough to lure people to what had been a crime-riddled neighborhood. This summer, orchestral and light show Lumenocity drew a record crowd of more than 42,000 over three days – the capacity of Great American Ball Park.

Reeder’s take: “We wanted to show them a mix of this region. It’s not all about Downtown, but Downtown gives us a great starting point to talk about revitalization.”

• Bragging rights: Site selectors also visited or saw Great American Ball Park, the Gateway Quarter in Over-the-Rhine, Newport on the Levee, the Ascent upscale condominiums in Covington and the Western & Southern Open tennis tournament. ■

H&A releases new report: H&A Global Outlook – Emerging Workforce Trends in Mexico

H&A released their latest global outlook report titled, H&A Global Outlook – Emerging Workforce Trends in Mexico. As the Mexican economy continues to grow, especially with a continued strength in exports, the country’s workforce is in the midst of a significant transition.  With an aging population and a greater percentage of its’ citizens living outside of its borders than any other country in the world, Mexico finds itself with challenges many countries do not currently face.  To offset these workforce hurdles, the country’s investment in education is surging and more and more workers are leaving the less developed agricultural industry for manufacturing and services.  Yet still with one of the cheapest labor forces in the world, the Mexican manufacturing workforce is experiencing great gains in their productivity.

The H&A report provides an overview of many key workforce factors and trendH&A Global Outlook Paper - Mexico Workforce Trendss in Mexico today.  As a company embarks upon the critical site selection process, the workforce and labor environment is vital to the future success of their operations.  To help ensure success, a company must identify the lowest cost, highest skilled, and most efficient workforce that meets the needs of the organizations and is able to maximize the output from the invested capital and technology.

Earlier this year, H&A opened their Mexico City office to further provide their first-class services to their clients in Mexico and expand the firm’s capabilities throughout Latin America.  Following the opening, Jason Hickey, President of Hickey & Associates, discussed the expansion opportunity, “Our newest office announcement in Mexico City is one that brings great excitement to the firm. As we assist our clients in navigating the global economy, Mexico continues to be a critical player on the world stage. Not only is the country a leader in the Americas, but a market with vast opportunities for a variety of industries.”

For a complimentary copy of the new H&A report, please click on the following link: H&A Global Outlook – Emerging Workforce Trends in Mexico.

H&A publica un nuevo informe: H&A Panorama Mundial – Nuevas tendencias de la Fuerza Laboral en México

H&A presentó su más reciente informe de Perspectivas Mundiales titulado H&A Panorama Mundial – Nuevas tendencias de la Fuerza Laboral en México. A medida que la economía mexicana continua creciendo, particularmente en el área de las exportaciones, la fuerza laboral del país se encuentra inmersa en una significativa transición. Con una población que comienza a envejecer y con el porcentaje de ciudadanos viviendo fuera de sus fronteras más alto del mundo, México enfrenta problemas que muchos otros países no tienen en la actualidad. Para contrarrestar estos obstáculos, el país está incrementando significativamente su inversión en educación, mientras que cada vez más trabajadores están abandonando el sector agrícola menos desarrollado para integrarse a los sectores de manufactura y servicios. Incluso con una de las fuerzas laborales más baratas del mundo, la mano de obra manufacturera mexicana está experimentando grandes aumentos en su productividad.

H&A Panorama Mundial - Nuevas tendencias de la Fuerza Laboral en MéxicoEl informe de H&A ofrece una visión general de los factores y tendencias clave que afectan a la fuerza de trabajo en México. Cuando una compañía se embarca en el proceso crítico de selección de sitio, la fuerza de trabajo y el entorno laboral son vitales para el futuro éxito de sus operaciones. Para ayudar a asegurar su éxito, una empresa debe identificar la mano de obra con el costo más bajo, la más alta calificación y la mayor eficiencia, de suerte que le permita responder a las necesidades de la organización, maximizando los resultados de su inversión en capital y tecnología.

A principios de este año H&A abrió su oficina en la Ciudad de México, incrementando su oferta de servicios de primera clase a sus clientes en México y expandiendo la capacidad de la empresa en América Latina. Tras la apertura, Jason Hickey, Presidente de Hickey & Associates, habló sobre la oportunidad de expansión, “Nuestro anuncio sobre la apertura de la nueva oficina en la Ciudad de México nos tiene muy emocionados. Conforme ayudamos a nuestros clientes a navegar la economía mundial, México sigue siendo un jugador de gran importancia en el escenario mundial. No sólo es un país líder en las Américas, sino que además representa un mercado con grandes oportunidades para una variedad de industrias. ”

Para obtener una copia gratuita del nuevo informe de H&A, haga click por favor en el siguiente enlace: H&A Panorama Mundial – Nuevas tendencias de la Fuerza Laboral en México.

H&A hits the links to support a worthy cause in the Twin Cities

For a third consecutive year, H&A was a proud sponsor of the annual Raise the Roof Golf Tournament to support the Twin Cities Habitat for Humanity (TCHFH) organization. TCHFH programs assist families across the Twin Cities metropolitan area, including the placement of over 1,000 families in TCHFH homes since 1985. The 2014 golf event was once again hosted at the Minneapolis Golf Club in St. Louis Park, MN.

“As expected, another great tournament for an even greater cause. It is always a privilege for H&A to have the opportunity to sponsor the event,” H&A Principal Mark Beattie remarked after the tournament. “We had a fun day on this beautiful course to support local families throughout the Twin Cities region.” Playing in the tournament’s scramble format, the H&A foursome scored a respectable -6 (66).

To learn more about the annual tournament, please visit the official Raise the Roof Golf Tournament website. For more information on the TCHFH, please visit www.tchabitat.org.

H&A’s Kemp featured in aerospace industry article

Jim Kemp, a Principal for H&A, was featured in a recent article in Trade & Industry Development magazine, a global publication serving executives within specific vertical industries to provide insight into the challenge of site selection and facility planning. Prior to joining H&A, Kemp spent decades with Lockheed Martin where he managed countless operations around the world, including a project recognized as a CoreNet Global Project of the Year.

The full article is below. To view the article on the Trade & Industry Development magazine website, please click the following link:Aerospace and Defense Industry: Navigating a Global Future.


Aerospace and Defense Industry: Navigating a Global Future
21 May, 2014
By: Jim Kemp

Last year’s focus on Airbus and Boeing plant expansions dominated the news for the aerospace and defense markets. Commercial aircraft orders have been on the upswing in their historical business cycle for several years now. The real news for site selectors in the coming months may be more focused on the redevelopment opportunities associated with consolidation in the U.S. defense market segments and the increased defense spending in Asia, Russia, the Middle East and Brazil.

This year, the global aerospace and defense industry is expected to grow about five percent. This growth will be driven mainly by the expectation of another record year for commercial aircraft sales. That strong growth will be offset somewhat by the reduction in U.S. military spending. Aircraft sales cycles tend to see a period of “over ordering” followed by a period of order delays or cancellations. Even considering this phenomenon, the commercial aircraft industry is expected to see 25 percent growth in the next 10 years. Revenues for the defense industry, which are dominated by U.S. spending, are expected to shrink by 2.5 percent next year. While aerospace and defense companies expect to see a reduction in total revenue, their margins are expected to improve. This improvement is largely attributed to improvements in operating efficiencies driven by industry consolidation and project phasing.

The reduction in defense spending for the U.S. is linked to the winding down of the wars in Iraq and Afghanistan as well as budget cuts from both the sequester and the current budget agreement signed into law this year. The U.S. defense budget is large, but when the budget does not grow adequately over time, the rising costs of medical care, employee salaries and ongoing operations eats into the availability of funds for new systems. A reduction in spacecraft, aircraft and ship orders have all combined to have a broad negative impact on U.S. aerospace and defense companies. While U.S. companies are experiencing reductions, countries like China, India, Russia and Brazil are increasing their spending. U.S. companies can share in some of those international opportunities, but certainly not all.

Recently, Lockheed Martin announced a number of plant closures for facilities in Pennsylvania, Arizona, California and Ohio. Last year, Boeing announced the closing of its Long Beach, California, site, which is finishing out its C17 build. BAE has announced the closure of its Sealy, Texas, plant. In most of these cases, any remaining workforce will be consolidated at underutilized sites within the companies and, in some cases, completely new sites are being considered. This industry has lower margins compared to other sectors. Aerospace and defense net margins are in the one to 10 percent range compared to other sectors that see 10 to 20 percent. When gross revenues start to decline, companies will look to reduce operating costs. Moving into new, smaller, more efficient factories in states with lower labor rates and state and local taxes is one way to achieve lower operating costs. Since the industry also relies on the federal budget, it can normally do a better job of forecasting than most industries. Over the last five years, the U.S. federal budget has been incrementally allocated through the continuing resolution process one year at a time. This made it hard for aerospace and defense companies to plan for the future. This tends to suppress any large investment decisions. In 2014, the U.S. finally passed a budget and companies can now move forward with investment plans. Based on this, expect to see most large aerospace and defense companies start announcing moves to improve operating costs through consolidation. This industry consolidation trend is expected to continue through 2014 and 2015.

During this latest commercial growth cycle, Boeing and its suppliers established new facilities in states where they may have not had much of a presence before. Those states were willing to offer significant tax incentives to Boeing as a means to capture thousands of new jobs. States were willing to forgo the direct tax benefits of an operation that size in order to capture larger indirect tax benefits. The same could be said for Airbus that, in 2012, announced its first U.S. plant and in 2013 broke ground on that facility in Mobile, Alabama. While there will still be more opportunity for site selection in the commercial aircraft market, most of the activity will center around the sub-tier supplier market and less on the major manufacturers. This suggests there may be more site selection and incentive activity on the defense segment of the aerospace and defense market than in the commercial aircraft segment. There is another element to consider when dealing with the defense market segment and that is the government’s property holdings.

In addition to these major defense contractors reducing their infrastructure holdings, the Department of Defense is looking to reduce its facility holdings as well. Defense Secretary Chuck Hagel indicated the Pentagon will ask for another round of base closures in 2017. Hagel further stated, “I am mindful that Congress has not agreed to our BRAC [base realignment and closure] requests for the last two years. But if Congress continues to block these requests even as they slash the overall budget, we will have to consider every tool at our disposal to reduce infrastructure.”

It is expected that budget pressures in 2014 through 2016 will also result in more opportunity for those seeking alternative uses for under-utilized government assets. In the recent budget authorization, language was included that allows base commanders to use proceeds from Enhanced Use Leases (EUL) to cover administrative costs associated with potential new EUL projects. This was added to the U.S. Code to encourage more activity on repurposing government assets, even in the absence of a BRAC authorization.

Look for commercial aircraft companies and their suppliers to try to take advantage of under-utilized government assets. In the absence of a BRAC in the next three years, the opportunity to leverage EUL as a tool to unlock the value of government assets can provide a relatively quick solution for companies experiencing rapid growth or looking to reduce their current infrastructure size and cost. Better utilization of government assets is a win-win for everyone. The government benefits from lower costs for operating their bases, which can translate to more money going to mission support and manpower. The taxpayer benefits by not seeing increased taxes to maintain current levels of military support, the commercial contractors benefit from lower investment costs during this growth period. Site selectors who have expertise in securing government assets should be in demand by commercial aircraft companies and their suppliers.

Communities that are in fear of becoming the victim of a BRAC in 2017 will most certainly be looking to help base commanders reduce their government cost. By reducing the base’s operating costs, it is assumed it will show the base to be more efficient and reduce its odds of becoming a BRAC target. This will lead the communities to provide some form of incentives for companies that may have need for the under-utilized assets. Communities that taken an even more aggressive approach toward preparing for the potential BRAC might consider creating a redevelopment plan in advance. This plan would allow the communities to evaluate the potential upside to being selected as a base closure site. The Association of Defense Communities reported that in the beginning of the last decade, 75 percent of communities that had base closures in 1995 experienced a positive economic impact. This was due mainly to the fact that the bases were located in areas that were experiencing rapid growth and had need for the less-densely populated property of the base. Communities that build an advanced redevelopment plan can also plan for the potential of becoming a receiving BRAC site, which can create strains on the local infrastructure.
The rapid growth of a small community can be just as difficult to manage as rapid shrinking. Strategies that combine the defense industry consolidation efforts and the commercial aircraft industry growth will have the most effective five- to 10-year plans because of the U.S. defense department’s need to reduce infrastructure.

U.S. aerospace and defense companies have been generating large amounts of cash reserves for quite some time. The largest aerospace and defense contractors have tens of billions of dollars in cash available to them. As we have seen orders for defense-related goods drop, these cash reserves are coming into play to increase company revenue through acquisitions. As a part of the industry consolidation, look for companies to make acquisitions both internal to the U.S. and internationally. The trend seems to show a peak of 306 disclosed acquisitions for a total value of $30.9 billion in 2011 to 242 acquisitions with a total value of $13 billion in 2013.This downward trend could be a reflection of the U.S. defense budget uncertainty. During all of the years from 2011 through 2013, the government operated under continuing resolution. Even prior to 2011, the government failed to pass a budget, but it seems companies became less convinced a budget commitment was going to happen in the near future. In some cases, the new acquisitions will result in consolidation of assets or restructuring of the acquired companies’ assets into spin-off sales. Typically, one would expect the majority of acquisitions to take place within the acquiring company’s supply chain. Implementing strategies to improve operating margins by vertically integrating a company has long been a common response to a shrinking market. When corporations can acquire their supply chain, the profit margins for those acquired companies is available to the parent company to add to its bottom line. While in some industries that amount of revenue may be relatively small, in the aerospace and defense industry that can amount to additional profit on 70 percent of product costs. Recent examples include United Technologies Corporation’s acquisition of Goodrich Corporation creating a new unit, UTC Aerospace Systems, which will allow it to gain a larger share of the aero-engine market. With the significant size of the cash reserves the large companies have generated, it would not be surprising to see larger acquisitions similar to those seen in the 1990s, although conventional wisdom says an additional large acquisition with all the new regulations is less likely to be approved by the U.S. government than in the 90s. Also, look for companies to make acquisitions in adjacent markets that could help provide for better diversity in the company’s portfolio. For example, there is an emerging trend of aerospace companies moving into the energy sectors. In most cases, the move to energy was with aerospace and defense technologies that have application to energy sectors such as oil and gas or renewables. Expansion into global cybersecurity is another adjacent market that seems to be growing. Lockheed Martin recently acquired Industrial Defender, a provider of cybersecurity products and services for the oil and gas and chemicals industry. Lockheed Martin’s stated goal is to combine its knowledge of government IT security with that of Industrial Defenders and provide it to critical infrastructure industries.

Whether it is through commercial aircraft sales, infrastructure consolidation, mergers and acquisitions or bracing for another round of BRAC, the aerospace and defense market will be very dynamic over the next few years. There is a definitively positive trend in site selection activity and those opportunities will continue to grow for the foreseeable future.

 

H&A releases Spring 2014 Legislative and Incentive Update

Today, Hickey & Associates released their H&A Legislative and Incentive Update – Spring 2014, a comprehensive review of the major state legislative activities related to business incentives and economic development since the beginning of the year. To access a complimentary copy of the report, please click on the following link: H&A Legislative and Incentive Update – Spring 2014.

incentive_leg_update_spring_14
 
H&A conducted a webinar covering the many new laws and policy changes in the H&A Legislative & Incentive Update – Spring 2014: