A healthy Aerospace and Defense M&A market
The evolving focus of Aerospace and Defense M&A
According to the study by Deloitte ,in the aerospace and defense industry, mergers and acquisitions (M&A) as we know them have recently changed. Instead of megamergers for the purpose of cost savings and synergies, current aerospace and defense M&A activity focuses on acquisitions that deliver new products and offer expansion into markets such as Asia, the Middle East, and beyond.
- Near-term aerospace and defense M&A is likely to focus on growth.
- Megamergers are likely to decrease in frequency while acquisitions of smaller targets could increase.
- Acquisitions will be used to gain new capabilities, access emerging technologies, and geographic expansion.
- Joint ventures and partnerships could replace outright mergers and acquisitions in some instances.
Source: Trends in aerospace and defense mergers and acquisitions
Defense subsector expands, while Commercial Aerospace growth slows down
According to Deloitte Aerospace & Defense Financial performance study:
Global aerospace and defense (A&D) sector revenues grew by 2.4 percent to US$674.4 billion in 2016, slightly above the estimated global domestic product (GDP) growth of 2.3 percent.
The top 100 companies analyzed added US$15.7 billion in revenues, with growth primarily driven by the European commercial and US defense subsectors. In terms of incremental revenue growth by segment, the original equipment manufacturers (OEMs) and electronics segments were the top contributors, adding US$3.4 billion and US$3.7 billion respectively.
Here below you can find key insights
- Global aerospace and defense sector revenue growth is slowing, marginally outpacing global GDP growth
- European A&D sector revenue growth continues to outperform the US sector
- The global defense subsector continued to recover as global defense spending increased, especially in the United States
- Global commercial aerospace revenue growth slowed from 6.3 percent in 2015 to 2.7 percent in 2016
- The OEMs and electronics segment experienced incremental revenue growths
- Global defense operating margin growth strengthens as the commercial aerospace margins tighten
- Propulsion segment was the leader in operating margins. However, Tier two suppliers now rank second
- Sector productivity experienced a moderate improvement in 2016, led by strong growth in Europe
- Debt levels continue to rise as companies increase leverage to finance acquisitions, share buybacks, and develop new and innovative products
- US and European A&D stocks outperformed their respective market indices
Source: Deloitte 2017 A&D Financial Performance Study
A&D sector was expected to return to growth in employment, with over 39,000 additional employees to be added in 2016 according to a study by Deloitte.
Is it really the case after 3rd quarter of 2016?
A PwC Insights:
Global Aerospace and Defense Merger and Acquisitions Q2 2016 by Bob Long, Chuck Marx, Scott Thompson, and Randy Starr.
Aerospace & Defense Insights by Alix Partners
In this study of Deloitte, you can find analyses of the Top 100 Global Aerospace and Defense (A&D) Companies, or business units of industrial conglomerates with A&D business, with reported revenue of more than US$500 million in 2015 with financial statements filed by 31 December, 2015.