Oct 23, 2023

Training & Simulation Sector Update – October 2023

Training & Simulation Trends
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Next-Generation Markets Offer Enticing Growth Prospects for the Training & Simulation Sector

Players in the Training & Simulation sector have seen healthy demand and revenue gains in recent years stemming from a favorable operating environment. The COVID-19 pandemic necessitated a transition to virtual training across a majority of end markets and investors poured substantial capital into developing innovative simulation technology. Notably, CAE (TSX:CAE) reported a 13% revenue increase year-over-year (YOY) in its fiscal year (FY) Q1 2024, while Thales (ENXTPA:HO) reported 7.7% organic sales growth during 1H 2023, according to the companies’ most recent earnings reports.1,2 Additionally, the resumption of commercial air travel in late 2021 and 2022 accelerated demand for pilot training amid an acute labor shortage. Sector players have also continued to capture revenue from military spending, supported by a shortage of qualified pilots and the expansion of the U.S. defense budget to over $800 billion. Training & simulations trends, including a healthy funding backdrop and favorable labor dynamics have continued to bolster sector players’ earnings. This has trickled down to the merger and acquisition (M&A) environment and aside from the 2021 mega market, deal volume has been steady and consistent over the prior few years.

Emerging technology solutions have surfaced as one of the major current Training & Simulation trends that are expected to drive further consolidation activity, with leading companies in the space developing and integrating next-generation technologies into their product offerings. In fact, CAE has centered its research and development efforts on emerging technology, emphasizing artificial intelligence (AI) and big data for its training services. The CAE Real-time Insights and Standardized Evaluations (CAE Rise™) family of software products have been augmented with new AI algorithms that provide deeper training assessment insights to flight instructors and training managers. French-based Dassault Systems (ENXTPA:DSY) has invested in next-generation simulation technology solutions for healthcare training applications too. The company’s “virtual twin” and Training-as-a-Service (TaaS) solutions provide users with AI-powered digital avatars that are created with data-enriched, evolving 3D models that replicate reality with scientific accuracy to test and improve performance virtually.3 The company’s virtual twin has many end market applications, expanding and diversifying its revenue opportunities. Sector participants that can integrate emerging technology such as AI and advanced data collection into their product offerings are positioned to benefit from a rapidly expanding Virtual Training & Simulation market, which is expected to grow by an annual rate of 13.9% between 2022 and 2030, according to Straits Research.4

Technology advances continue to improve the effectiveness of training and simulation. They allow us to more convincingly suspend our disbelief in the training activity and they enable remote learning, as repetitive activities increase learning transfer.

Ted PolkManaging Director, Capstone Partners

2023 M&A Volume Matches Prior Year

The Training & Simulation sector has enjoyed a consistent level of deal flow through year-to-date (YTD) 2023, with 14 transactions announced or completed. Transaction volume has matched the prior year period, as buyers have continued to target companies with value-added product offerings serving defensible end markets such as Healthcare, Defense, and Education. Private strategic buyers have accounted for 35.7% of all transactions through YTD, an increase of 7.1% compared to YTD 2022. Sponsor-backed companies have become the second most active buyers in the space to-date (28.6% of total transactions). Despite an elevated interest rate environment and concerns about the macro economy, financial sponsors have increased their share of platform deals in this sector, accounting for 14.3% of total transactions compared to 11.1% in full-year 2022. Private equity is expected to remain acquisitive in the Training & Simulation sector through year-end 2023 and into 2024 with target companies showing lower counter party risk due to a bevy of more recession-resistant Department of Defense (DOD) and Healthcare customers.

Buyers in the Training & Simulation M&A market have placed premiums on middle market companies offering VR training solutions. This includes Samsung’s (KOSE:A005930) announced acquisition of virtual reality (VR) system developer eMagin (NYSE:EMAN), via its subsidiary Samsung Display, for an enterprise value of $228.8 million, equivalent to 7.7x EV/Revenue (May). Large strategics in the space such as Samsung have continued to emphasize the importance of the VR Training market in their long-term growth strategies. According to Joo Sun Choi, President and CEO of Samsung Display, “We expect extended reality (XR) devices to have significant potential of growth in the future and eMagin’s technology in this space will enable Samsung to offer innovative products to more customers and strengthen its XR-related business.”5

Increased DOD Funding Supports Elevated Buyer Appetite in Training & Simulation Sector

Emerging technologies and AI have enhanced VR training product offerings across multiple end markets, leading to increased acquirer appetite and investment. The Defense end market in particular has consistently experienced an influx of capital from an annually rising DOD budget. The fiscal year (FY) 2023 defense appropriations bill provided $797.6 billion for DOD discretionary defense spending through September 30, 2023, an increase of $69.2 billion over FY 2022 and $109.5 billion over FY 2021, according to the Congressional Research Service.6 Additionally, the outlook for FY 2024 appears positive too, as the current National Defense Authorization Act (NDAA) authorizes $886.3 billion in spending for total national defense discretionary programs, an increase of $28 billion over the FY 2023 NDAA enacted level.7

Consistent increases in U.S. defense spending have insulated the Defense end market from macroeconomic headwinds in the near-term. This has elevated interest among private and sponsor-backed buyers for sector players with innovative product offerings catering to DOD customers. Of note, Trive Capital-backed Forward Slope acquired Soar Technology in August for an undisclosed sum. Soar is a leading provider of advanced AI solutions for complex DOD mission requirements, specializing in warfighter simulation training. The company's AITeamMATE™ platform models human behavior to create non-player characters in simulations and game environments. This increases the number of domains and scenarios that the platform can support and enhance, including Live, Virtual, Constructive (LVC) training simulations, cyberattack and defense simulations, and medical decision support.8 "SoarTech has an excellent reputation as a differentiated solutions provider, talented team and unique market position in next-generation AI/ML technologies. We are thrilled to partner with SoarTech to add artificial intelligence capabilities that support and enable tactical decision making in an increasingly complex defense environment," commented David Stinnett, Partner at Trive Capital.9 Other notable transactions highlighting Training & Simulation trends in defensible end markets are highlighted below.


  • Alpine Partners-Backed Axcel Learning Acquires ExitCertified (June 2023, Undisclosed) - Axcel Learning, an Alpine Partners-backed professional education platform offering upskilling and professional development to businesses, has acquired ExitCertified in June for an undisclosed sum. ExitCertified's market leading Live Virtual training platform provides instructor-led information technology (IT) training programs to government organizations. The company is additionally known for its CloudCentrix training suite which presents various commercial and open-source technologies, and IT training solutions to help organizations get the most out of their cloud investments. This acquisition represents Axcel's third instructor-led IT training acquisition after Accelebrate (January 2023, undisclosed) and Web Age Solutions (June 2022, undisclosed). The ExitCertified transaction also represents Axcel's third acquisition to-date, and sixth since 2022.

Space Systems

  • AE Industrial Partners-Backed York Space Systems Acquires Emergent Space Technologies (June 2023, Undisclosed) - York Space Systems, a portfolio company of AE Industrial Partners, acquired Emergent Space Technologies in June for an undisclosed sum. Maryland-based Emergent Space Technologies researches, develops, integrates, and tests advanced software solutions for civil, military, and commercial space missions. Among its extensive list of offerings, one of the company's main capabilities is space system simulation. This includes the development of dynamic simulations on various computing platforms, including the development of high-fidelity sensor and actuator models. The company is currently working on the development of guidance and machine vision algorithms for NASA’s Goddard Space Flight Center's Restore-L mission, as well as flight simulation software for Lockheed Martin's (NYSE:LMT) Orion Manned Spaceflight Program, according to the company's website.10 "We view the continued growth of our software capabilities as a critical step in expanding York's offerings and accelerating our ability to execute for all our customers. This major acquisition ensures the right technology and resources are immediately available to deliver exceptional end-to-end mission solutions on time and at the fixed prices each of our customers expects," said York Space System's CEO, Dirk Wallinger.11

To discuss the impacts of emerging technology and next-generation markets, provide an update on your business, or learn about Capstone's wide range of advisory services and Training & Simulation sector knowledge, please contact us.

Joe Collins, Analyst, was the lead Market Intelligence contributor to this article.


  1. CAE, “Financial Reports,” https://www.cae.com/investors/financial-reports/, accessed October 6, 2023.
  2. Thales, “Half-Yearly Financial Report,” https://www.thalesgroup.com/sites/default/files/database/document/2023-07/Thales%20-%20RFS%20H1%202023%20-%20VA.pdf, accessed October 6, 2023.
  3. Dassault Systems, "Meet 'Emma Twin' Dassault Systemes' Avatar Showcasing How Virtual Twins Drive Healthcare Innovation," https://www.3ds.com/newsroom/press-releases/meet-emma-twin-dassault-systemes-avatar-showcasing-how-virtual-twins-drive-healthcare-innovation, accessed September 15, 2023.
  4. Straits Research, "Virtual Training and Simulation Market," https://straitsresearch.com/report/virtual-training-and-simulation-market, accessed September 15, 2023.
  5. GlobeNewswire, "eMagin Enters Into Definitive Merger Agreement With Samsung Display," https://www.globenewswire.com/news-release/2023/05/17/2671072/0/en/eMagin-Enters-Into-Definitive-Merger-Agreement-With-Samsung-Display.html, accessed September 15, 2023.
  6. Congressional Research Service, “”FY2021 Defense Appropriations Act: Context and Selected Issues for Congress,” https://crsreports.congress.gov/product/pdf/R/R46812/3, accessed September 15, 2023.
  7. Congressional Research Service, "FY2024 NDAA: Summary of Funding Authorizations," FY2024 NDAA: Summary of Funding Authorizations - EveryCRSReport.com, accessed September 15, 2023.
  8. SoarTech, "AITeamMate, Enabling the Next Generation of Constructive Simulation," https://soartech.com/wp-content/uploads/2022/11/SlickSheet_Single_AITeamMATE_112022.pdf, accessed September 15, 2023.
  9. PRNewswire, "Trive-Backed Forward Slope Acquires Soar Technology," https://www.prnewswire.com/news-releases/trive-backed-forward-slope-acquires-soar-technology-301909227.html, accessed September 15, 2023.
  10. Emergent Space Technologies, "Modeling & Simulation," https://www.emergentspace.com/capabilities/modeling-simulation/, accessed September 15, 2023.
  11. PRNewswire, "York Space Systems Acquires Emergent Space Technologies," https://www.prnewswire.com/news-releases/york-space-systems-acquires-emergent-space-technologies-301844948.html, accessed September 15, 2023

Related Transactions

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