Tactical Products M&A Update – January 2023

Technology & Apparel Investments Drive Sector Growth, Support Healthy Tactical Products M&A Activity

Capstone Partners released its January 2023 Tactical Products M&A Update, reporting that the rise in outdoor recreation activities during the pandemic has served as a boon to growth in the sector and supported healthy Tactical products M&A activity levels. While consumer spending has moderated in recent months, personal consumption expenditures on sporting equipment, supplies, guns and ammunition increased 6.2% year-over-year (YOY) in November. National Instant Criminal Background Check System (NICS) firearm background checks have slowly retreated from pre-pandemic highs, declining to 1.7 million in December 2022, marking a 2.5% decrease YOY according to The Reload. While December background checks were down YOY, 2022’s total numbers were well ahead of pre-pandemic years. The FBI ran 16.4 million total NICS background checks in 2022, well ahead of pre-pandemic levels of ~13.2 million. Increasing background checks serve as a strong barometer for rising sales in new and pre-owned firearms.

Elevated demand for firearm alternatives used by law enforcement and increased consumer spending on personal protection has created a healthy backdrop for the Non-Lethal Weapons segment. The global market for non-lethal weapons used by military personnel, law enforcement, and citizens is expected to grow to $12.5 billion by 2028 from $7.4 billion in 2020, equivalent to a compounded annual growth rate (CAGR) of 7.4%. Notably, violent crime rates in the U.S. increased 3.0% YOY in September 2022. Products such as pepper spray and rock salt launchers have been developed to allow the user to use non-lethal, but effective, force against assailants.

Deal activity has remained strong through year-to-date (YTD) 2022, with 30 transactions announced or completed, mirroring prior year levels. A shift towards acquisitions that focus on apparel and non-lethal technologies have fueled the merger and acquisition (M&A) market. Emerging from the COVID-19 pandemic, where ammunition and gun sales drove sector deal activity, many firms have looked for ways to diversify product lines away from firearms.

“Tactical companies with differentiated technology, product innovation, direct-to-consumer reach, and attractive margins will continue to stand out from the pack and attract M&A interest” said Capstone Director Peter Bailey, the lead contributor in the newly released report.

Also included in this report:

• Insights into federal spending on new weapons systems development and production, and how it is expected to provide significant revenue opportunities for sector participants.
• Summaries of recent Tactical sector transactions, and the main drivers behind each deal.
• A breakdown of public company data in the Tactical sector, broken down into three major segments: Firearms, & Ammunition, Less-lethal, and Sporting Goods Retailers.