Private-equity firms are ramping up investment in the booming space sector, with some aiming to plant flags in an industry where buyout shops haven’t previously been major players. This year has seen by far the most deal activity ever by private equity in the space sector, according to PitchBook Data Inc. Through Sept. 16, buyout firms invested about $1.22 billion in U.S.-based space companies, exceeding the second-highest annual sum ever by 59% in less than a full year.
For all the dynamic growth of the space sector, it is still too young, and most companies are still too small, to absorb large amounts of private-equity capital, according to investors. In the space sector, “it’s prime time for venture. For private equity, it will be in maybe a few short years,” said James Mertz, a managing partner at venture-capital firm SpaceFund.
The explosion of interest in the space sector over recent years has been fueled by headline-making launches by billionaire-led companies: Elon Musk’s SpaceX, Jeff Bezos’ Blue Origin, and Richard Branson’s Virgin Galactic. At the same time, new miniaturization technologies have reduced the cost of making and deploying satellites, causing a flurry of interest in the possibilities for satellite technology.
The new high-profile space companies have reignited interest in the sector, according to Chad Anderson, managing partner at Space Capital, a venture-capital investment firm. “We kind of had stagnation in space for a long time before these companies came along,” he said. “Now there is a lot of competition.”
A recently announced private-equity deal related to military involvement in space is ATL Partners’ investment in Geost LLC, which designs sensors used in space missions. “The commercial market is growing substantially, driven by costs going down,” but “at the end of the day, NASA and governments around the world drive space,” said Kirk Konert, a partner at private-equity firm AE Industrial Partners.
