MAG Aerospace looks for adjacencies as it plots growth path

By Marjorie Censer  / September 24, 2018

MAG Aerospace, founded less than a decade ago, is seeking growth, hoping to expand into adjacencies and build a larger international business, according to its chief executive.

The Fairfax, VA-based company was founded by Joe Fluet and began operations in 2010. Now, it has more than $400 million in annual sales and about 1,300 employees.

MAG offers turnkey intelligence, surveillance and reconnaissance services to government, international and commercial organizations, using contractor-owned and -operated manned and unmanned aircraft in austere locations.

In the last three years, the company has made a number of acquisitions, using these companies to help it expand into adjacent areas. Backed by private-equity firm Clairvest Group initially, MAG is now backed by New Mountain Capital, a New York-based private-equity firm that was seeking to invest in a federal services business.

MAG in 2015 acquired BOSH Global Services, moving it into unmanned C4ISR. In 2016, it picked up remote services, logistics and infrastructure company Dover Vantage, while in 2017, it added Avenge, which specialized in manned ISR operations and training, and Discovery Air Fire Services, adding aerial forest fire management and environmental monitoring services to its offerings.

Most recently, earlier this year, MAG picked up North American Surveillance Systems, which focused on airborne special mission systems integration.

In founding MAG, Fluet told Inside Defense last week, he saw an opportunity for a business that operated as a service, giving the government access to its technology.

"If I'm a government customer, there's a . . . gee-whiz sensor I really want," he said. "By the time I procure that sensor, which takes me three years, it's two years and eight months obsolete."

Fluet, who is MAG's chief executive, said he envisioned the company as a technology integrator, able to identify the latest technologies and offer those as a service.

"We're not a drone company, we're not a sensor company, we're a tech company that sells high-tech solutions to our customers, who are primarily government, but not exclusively," Fluet said, noting the company also counts intergovernmental bodies, like NATO, and commercial businesses as customers. Still, about two-thirds of the company's sales are to U.S. government organizations.

Commercial sales are in the single-digit percentage, he said.

Fluet said the company plans to continue to acquire companies with adjacent capabilities.

"We'll be doing larger acquisitions," he said. "When we bought BOSH, for instance, in 2013, that was a bet-the-company deal to buy that company for $20 million. . . .  It would be a bolt-on today."

He said MAG would specifically seek companies with capabilities in post-mission processing.

"This is a challenge that's getting harder," he said, noting the amount of data that can be collected continues to grow. "Technology is not solving this problem; it's making it worse."

Fluet said MAG is "moving in that direction" toward using artificial intelligence, but "it's just not there."

"AI can assist, but you still need that human factor to make judgment calls," he continued.

Additionally, Fluet said the company expects to bolster its international business.

"International will continue to grow," he said. "It will significantly grow."