Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

January 05, 2022

Strategic acquisition of Arcturus UAV, financed by three of the largest banks in the nation, fuels dramatic market expansion for robotics company, most recently recognized for its involvement with the Mars Helicopter.  

 

It’s been quite a year for AeroVironment, a robotics company that is a global leader in intelligent, multi-domain robotic systems. AeroVironment literally rocketed into the headlines as one of the most prominent contractors involved in the development of the Ingenuity Mars Helicopter that NASA/JPL flew on Mars. The company was prominently featured in coverage of the historic flight by the Wall Street Journal, 60 Minutes and more.

Yet despite all the notoriety it received from that trip to another planet, its market expansion here on Earth may have an even larger impact on AeroVironment’s future. A $400+ million acquisition financed by U.S. Bank and two other large financial institutions will allow AeroVironment to expand into the mid- and large-size drone markets and better position itself for lucrative defense and commercial contracts for years to come. 

 

Details of AeroVironment Expansion

  • $200 million term loan and $100 million line of credit split among three large financial institutions. 
  • Acquisition of Arcturus UAV and other recent acquisitions fueled expansion into Group 2/3 unmanned aircraft market. 
  • Financing executed within 45 days to facilitate speed of acquisition.

 

How the deal came together

“We went from zero to 60 very quickly,” says Kevin McDonnell, AeroVironment senior vice president and chief financial officer. “In a matter of weeks, we got the banks together and the commitments from them to go ahead with the financing, which was absolutely necessary to enable this acquisition, which was very strategic for us.”

“U.S. Bank had less connection with us and they stepped up right away. With the speed necessary for this transaction, it was important to see they were so committed to this project."

McDonnell says the deal came together in less than 45 days – remarkable speed for a financing plan of this size – and even more impressive because AeroVironment held onto most of its cash in the past. It didn’t have a track record of financing for lenders to lean on. Further complicating the deal, the company was already working on two other acquisitions that would utilize much of its remaining cash.

“We knew we had the other transactions in the pipeline that were going to take the cash down further,” he explains. “So, the working capital facility was important to demonstrate to the market that we have good liquidity levels and the flexibility to adjust to future acquisition opportunities.” 

 

Understanding AeroVironment’s expansion opportunity

Headquartered in Virginia with several offices in Southern California, AeroVironment is a global leader in intelligent, multi-domain robotic systems and serves defense, government and commercial customers. The company provides technology solutions at the intersection of robotics, sensors, software analytics and connectivity that deliver more actionable intelligence so their customers can proceed with certainty. The company began working with NASA/JPL on the Ingenuity Mars Helicopter project in 2013.

In order to add scope and strength, AeroVironment planned the strategic acquisition of Arcturus UAV to grow its Group 2/3 unmanned aircraft and contractor-owned, contractor-operated services. Whereas AeroVironment manufactures and designs small-size drones (typically less than 20 pounds gross takeoff weight), the acquired company provides synergies in areas that AeroVironment was not participating: medium-sized UAS (Group 2 – 21 to 55 pounds maximum gross takeoff weight) and large segment UAS (Group 3 – 55 to 1,320 pounds maximum gross takeoff weight).

Arcturus’ products include fixed wing configurations with various launch types in addition to complete ground control systems, support packages and end-to-end field services.

“This acquisition was strategic because it enabled us to get into a very large market in Group 2/3 aircraft,” McDonnell explains. “That is a $1 billion market and it’s growing.”

In fact, the Group 2/3 UAS market is expected to triple in the next five years to $3 billion and the acquisition of Arcturus positions AeroVironment positively within the segment – now and in the future.

“It allows us to compete in that market today. There are large opportunities with the United States Army Future Tactical UAS (FTUAS) program,” he explains. “But we clearly didn’t just buy this company for that program. We really bought this company to be in the Group 2/3 market for the long haul. It's a very large market. This just happens to be a near-term opportunity.”

 

Financing the Arcturus acquisition

The acquisition of Arcturus required $405 million in capital, $50 million in stock, and nimble work by the banks involved.

“The financing that we actually took on the deal was a $200 million term loan facility. We also negotiated a $100 million working capital facility along with that, to provide liquidity,” McDonnell explains. “With our other two acquisitions quickly approaching, that speed and flexibility were crucial.”

Only the largest banks have the balance sheets to support that kind of financing, so the deal was split evenly between three institutions. Each bank committed $100 million inclusive of the revolver to support the growth projection of the merged companies. AeroVironment had long-term relationships with two of the banks, but U.S. Bank was a new partnership.

“I was super impressed with the fact that U.S. Bank had less connection with us and they stepped up right away,” McDonnell says. “With the speed necessary for this transaction, it was important to see they were so committed to this project.”

 

U.S. Bank and the Southern California connection

With 345 branches and almost 200,000 business customers in the Southern California area, U.S. Bank was well-positioned to turn that connection into a relationship. McDonnell already knew a U.S. Bank employee from Little League, where their sons played together. Yet he was still impressed by the personal touch he received throughout the process. McDonnell points out that Southern California market president Rudy Medina and team met with the AeroVironment team several times while learning about their business, culminating in a hosted dinner.

“They took time to get to know me and know the company. And that's something special,” he says. “U.S. Bank kind of gave us a local feel, with the local market president coming out for a personal one-on-one meeting. To make that connection, especially during COVID, was really impressive.”

 

Our Southern California team combines the power of our hyper-local experience with our ethical reputation to build solutions that propel your business forward. To learn more about Corporate and Commercial Banking with U.S. Bank in Southern California, visit our website or contact us to request a call.

Related content

How I did it: My house remodel

How do I prequalify for a mortgage?

8 steps to take before you buy a home

Tailor Ridge eBill case study

5 tips to help you land a small business loan

Middle-market direct lending: Obstacles and opportunities

The value of engaging a professional paying and exchange agent

What is a home equity line of credit (HELOC) and what can it be used for?

Money Moments: How to finance a home addition

Common unexpected expenses and three ways to pay for them

New technology streamlines M&A transactions

Leverage credit wisely to plug business cash flow gaps

Improve online presence your business

How to use debt to build wealth

4 benefits of independent loan agents

How I did it: Deciding whether to buy an RV

Take the stress out of buying your teen a car

Streamline operations with all-in-one small business financial support

Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

Know your customer: How updated rules affect M&A closings

Personal loans first-timer's guide: 7 questions to ask

The moment I knew I’d made it: The Cheesecakery

Choosing your M&A escrow partner

Evaluating interest rate risk creating risk management strategy

Opening a business on a budget during COVID-19

How small businesses are growing sales with online ordering

What’s a subordination agreement, and why does it matter?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

Parent checklist: Preparing for college

What are conforming loan limits and why are they increasing

Should you get a home equity loan or a home equity line of credit?

How to establish your business credit score

What is a CLO?

When to consider switching banks for your business

Is it the right time to refinance your mortgage?

4 questions to ask before you buy an investment property

Is a home equity line of credit (HELOC) right for you?

10 uses for a home equity loan

How to use your home equity to finance home improvements

What to know when buying a home with your significant other

Webinar: Mortgage basics: What’s the difference between interest rate and annual percentage rate?

Webinar: Mortgage basics: How much house can you afford?

Webinar: Mortgage basics: Buying or renting – What’s right for you?

Webinar: Mortgage basics: What is refinancing, and is it right for you?

Webinar: Mortgage basics: Prequalification or pre-approval – What do I need?

Webinar: Mortgage basics: How does your credit score impact the homebuying experience?

Webinar: Mortgage basics: Finding the right home loan for you

Webinar: Mortgage basics: 3 Key steps in the homebuying process

These small home improvement projects offer big returns on investment

What is refinancing a mortgage?

6 questions to ask before buying a new home

Student checklist: Preparing for college

Webinar: Uncover the cost: College diploma

The A to Z’s of college loan terms

Co-signing 101: Applying for a loan with co-borrower

Practical money skills and financial tips for college students

How I did it: Paid off student loans

Everything you need to know about consolidating debts

Your quick guide to loans and obtaining credit

Test your loan savvy

Is a home equity loan for college the right choice for your student

How to apply for federal student aid through the FAFSA

Be careful when taking out student loans

Your financial aid guide: What are your options?

ABL mythbusters: The truth about asset-based lending

Collateral options for ABL: What’s eligible, what’s not?

How jumbo loans can help home buyers and your builder business

5 risks you need to manage when expanding your global footprint

When small companies buy big: The potential of asset-based lending

5 tips for a successful joint venture

How to maximise your infrastructure finance project

Questions to ask before buying a car

What you should know about buying a car

How to choose the best car loan for you

What you need to know before buying a new or used car

Can you take advantage of the dead equity in your home?

How to identify what technology is needed for your small business

How to get started creating your business plan

What is needed to apply for an SBA loan

Planning for restaurant startup costs and when to expect them

How to fund your business without using 401(k) savings

How iPads can help increase efficiency in your salon

Tools that can streamline staffing and employee management

The different types of startup financing

Costs to consider when starting a business

How to expand your business: Does a new location make sense?

How to choose the right business savings account

How a small business is moving forward during COVID-19

Prioritizing payroll during the COVID-19 pandemic

5 questions business owners need to consider before taking out a loan

How to establish your business credit score

How to make the most of your business loan

Do you need a business equipment loan?

Investing in capital expenditures: What to discuss with key partners

Can ABL options fuel your business — and keep it running?

Tech lifecycle refresh: A tale of two philosophies

At your service: Outsourcing loan agency work

Maximizing your infrastructure finance project with a full suite trustee and agent

An investor’s guide to marketplace lending

What type of loan is right for your business?

Tech tools to keep your restaurant operations running smoothly

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.