Kohlberg Kravis Roberts & Co. announced it will be taking private Circor International in a deal valued at $1.6 billion. The machinery maker builds flow-control devices, such as pumps and valves, for industrial, aerospace, and defense customers. Circor lauded the deal in its press release, stating, “We believe that having the support and resources of an experienced investor like KKR will help us expand our presence in the flow control space and support our mission to deliver the highest-quality products and services to our customers, many of which play a critical role in protecting national security.”
Circor serves multiple industries from chemical to power generation to oil & gas and even life sciences; however, this is a particularly pivotal time for one of its major customers: the U.S. Department of Defense.
Defense spending worldwide exceeded $2 trillion for the first time in 2020 and jumped to $2.24 trillion by 2022. Russia’s invasion of Ukraine in 2021 sparked a 13% rise in military spending in Europe, with expenditures in Western and Central Europe reaching levels not seen since the end of the Cold War. According to Lorenzo Scarazzato of SIPRI’s Military Expenditure and Arms Production Programme, “While the full-scale invasion of Ukraine in February 2022 certainly affected military spending decisions in 2022, concerns about Russian aggression have been building for much longer. Many former Eastern bloc states have more than doubled their military spending since 2014, the year when Russia annexed Crimea.”
Military spending in Asia and Oceania has likewise continued to soar as China has sparked a military spending spree in the region. Over the past 10 years, China’s military expenditures have grown by 72%. In turn, India’s expenditures have increased by 33%, Indonesia’s by 35%, and South Korea’s by 43%. As Keio University Professor Ken Jimbo puts it, “Asia has the potential to become a geopolitical powder keg.”
For all of these increases, other nations’ spending remains dwarfed by U.S. military spending. At $877 billion last year, the U.S. accounts for 39% of expenditures worldwide – still three times more than China, the world’s second largest spender. In fact, the U.S. spends more on defense than the next 10 countries combined.
Distribution of military spending worldwide in 2022, by country
According to Reuters, in March of 2022, Circor flagged irregularities in its financial statements and brought in an independent accounting firm while engaging in preliminary M&A discussions.