Table of Contents
Uncertainty over the Future of Defense Spending is Cause for Concern
Post 2011, merger and acquisition activity in the global aerospace and defense industry has been restrained due to economic slowdowns triggered by trouble in the Eurozone. This study analyzes the mergers and acquisitions that have taken place in the global aerospace and defense industry from January 2007 to September 2012. Deals are analyzed from both the target and the buyer's perspective. Analyses by deal value and volume across geographies and sub-segments have been covered, along with analyses of cross-border transactions and transaction multiples such as EV/revenue and EV/EBITDA. Also included are lists of transaction advisors to target and buyers by transaction value and volume.
• Merger and acquisition (M&A) activity in the aerospace and defense industry has remained suppressed in 2012, with both deal volumes and deal values dropping.
• Deal values declined sharply by X percent to $X billion as of September 2012 compared to $X billion in 2011.
• In the same time frame, the number of deals dropped X percent to X as of September 2012.
• Aerospace and defense maintenance and services and aircraft systems, components, and equipment are the sectors that have dominated M&A activity in the study period.
• The percentage of transactions involving “100.0 percent of stake bought” has decreased from X percent in 2007 to Xpercent as of September 2012.
• Weaker defense budgets anticipated in the next two years are likely to result in cross-border collaborations, which is expected to be a key driver for M&A activity.
• With the possibility of sequestration being delayed as late as the end of Q1 2013, the overall deal environment is expected to be restrained owing to uncertainties regarding the expected changes.
This research service analyzes the merger and acquisition (M&A) transactions in the global aerospace and defense industry from January 2007 to September 2012. Deals are analyzed by segment and geography. Cross-border deals are also analyzed. The outlook for M&A is also provided. (In charts and tables, wherever 2012 is mentioned, it refers to analysis of data as of September 2012 unless stated otherwise).
• Across segments
• Across geographies
• Valuation multiples
• Stock price variations
• Percentage of stake acquired
• Type of buyer
January 2007 to September 2012
• Frost & Sullivan in-house research expertise
• Established business and financial databases, such as Capital IQ
• Company annual reports
• Published news
• Press releases
Note: Financial data used for analysis is as of 23 October 2012
Sectors Covered in the Study
Aerospace and Defense Maintenance and Services: Establishments that provide maintenance, repair, and/or overhaul services for aerospace and/or defense products. Distribution of fuels/products for aerospace and defense industries can also be included.
Passenger and Cargo Aircraft and Airplanes: Establishments primarily engaged in manufacturing aircraft and airplanes used for transporting passengers and cargo.
Aircraft Systems, Components, and Equipment: Establishments primarily engaged in manufacturing systems, components, and equipment used in aircraft that include engine and engine parts, fuel tanks, navigation, guidance, and emergency systems.
Spacecraft and Satellites: Establishments primarily engaged in manufacturing spacecraft, vehicles designed for traveling in outer space and satellites, and electronic communication and broadcasting equipment.
Aerospace Transportation Support Systems: Air transportation support systems, such as flight stimulators, and testing, refuelling, and deicing equipment.
Aerospace Research and Development: Establishments that offer research and development services for aerospace vehicles.
Light Weapons and Ammunition: Small arms and ammunition used by armed and security forces that include revolvers, self-loading pistols, mounted grenade launchers, and portable anti-aircraft guns.
Conventional Weapons: Weapons that include semi-automatic pistols, rifles, sub-machine guns, heavy-caliber mortars, wire-guided missiles, shoulder-held anti-tank missile launchers, dynamite, RDX, and plastic explosives.
Military Armored Vehicles: Armored vehicles used in war by the military, such as tanks and armored trucks.
Military Watercraft: Watercraft used for transporting military equipment and cargo from one ship to another, such as floating cranes, modular causeway systems, barges, harbor and ocean-going tugs, and landing craft.
Military Aircraft: Aircraft used by the military for war, such as fighter jets, attack aircraft, bombers and airlifters, and helicopters.
Defense Electronics: Electronic products that include night vision, air defense, electronic warfare and battlefield communications products, and military air traffic control systems.
Guided Missiles and Components: Missiles that have the ability to maneuver and can be guided for tracking, guidance, and flight.
Rockets and Subsystems: Launch vehicles and related military equipment that carry a warhead for defense/attack purposes.
M&A Deal Climate
Since 2011, M&A activity in the aerospace and defense industry across the globe has been restrained owing to the global economic slowdown triggered by trouble in the Eurozone. The weakening of the financial profiles of developed countries has led to defense budget cuts that have negatively impacted the deal environment (there is a Xpercent correlation between world GDP growth and growth in deal volume from 2007 to 2011). Budget cuts increase competition among the existing participants and heat up the battle for the available amount. Given this, having capabilities in key sectors will be of prime importance for companies. Industry participants seek businesses that bolster their portfolio of offerings that will help them increase their capabilities required to capture a larger share of the dwindling funds. This is also expected to drive cross-border deals, as it also paves the way for geographic expansion. As larger companies begin to bolster their capabilities by acquiring smaller firms, M&A activity will increase and remain active.
Who will benefit?
• Companies operating in the global aerospace and defense industry
• Private equity
• Venture capital investors
• Fund managers
• Retail investors
• Sovereign wealth funds
• Hedge funds
• Insurance funds; other members of the investing community
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