M&A deal activity in the global aerospace and defence sector experiences strongest performance in past five quarters, according to PwC

Transaction value in Q1 for deals over $50 million increases 345% on a year-over-year quarterly basis

May 18, 2010 — The global aerospace and defence (A&D) sector experienced its strongest performance in the past five quarters with regards to total deal value, according to the PricewaterhouseCoopers LLP report Mission Control: First-quarter 2010 global aerospace and defence industry mergers and acquisitions analysis.

The total deal value for the A&D sector in the first quarter of 2010 is approximately 4.5 times that of the lows experienced in the first quarter of 2009, while average deal value is roughly 3.5 times that of the lows experienced in the first quarter of 2009.

• The total number of deals increased to 68 deals in Q1 2010 from 63 in Q1 2009.  While the number of deals in Q1 2010 declined modestly compared to Q4 2009, the annualized level of activity remains at the high end of the historical average and the average transaction value is up 78% from Q4 2009
• There were two deals greater than $1 billion in the first quarter of 2010, with a total quarterly deal value of $5 billion up from $3.2 billion in Q3 2009 and $2.5 billion in Q4 2009
• On a year-over-year quarterly basis, total transaction value increased by 345% from $906 million to $5 billion for all deals with a reported value over $50 million
• The average deal value of transactions greater than $50 million also rose to $630 million during the first quarter of 2010, representing a 52% increase compared to the previous quarter
• In Q1 2010, the average transaction value rose significantly to $244 million from an average of $188 million from 2001 to 2009

“We believe there are many catalysts in place that support continued strength in the A&D mergers and acquisitions market, including an improving commercial aviation picture and reduced levels of defence spending which will spur some consolidation in the sector,” said Mario Longpré, partner and national leader of the Aerospace and Defence practice, PwC Canada.  “This sector is trending towards more large and mid-size deals as many A&D companies came out of the recession with strong balance sheets.”

The most notable change in the A&D mergers and acquisitions market during Q1 2010 is the re-emergence of financial investors who have had minimal involvement in deal activity since the third quarter of 2008. However, in the first quarter of 2010, financial investors accounted for 38% of total deals worth $50 million or more, compared to just 13% in 2008 and 12% in 2009.

From a regional perspective, North America (particularly the US) continues to represent a significant portion of deals measured by both number of deals and value of deals greater than $50 million. In the first quarter of 2010, North America represented 41% of deal value by target and accounted for 50% of the number of deals by target.

In terms of acquisitions, North America continues to represent the largest portion of deals worth $50 million or more (38%) compared to the UK and Eurozone (25%), Europe ex-UK and Eurozone (25%), and Asia and Oceania (13%). Additionally, the UK and Eurozone and North America regions accounted for the majority of deal value (41% and 40% respectively), compared to Europe ex-UK and Eurozone (17%) and Asia and Oceania (2%).

For more information and to access the full report, including the special section on M&A due diligence in a recovering economy, visit the industrial manufacturing industry website at http://www.pwc.com/us/industrialproducts.