M&A Activity in the Global Aerospace and Defence Sector Slows in Q2 2010

Total deal value declines to US$2.2 billion

August 31, 2010—Merger and acquisition (M&A) deal activity in the aerospace and defence (A&D) sector proved relatively sluggish in Q2 2010 compared to the previous quarter, according to a new PricewaterhouseCoopers (PwC) report, Mission control: Second-quarter 2010 global aerospace and defence industry mergers and acquisitions analysis.

According to the report, the total value for announced deals in the A&D sector in Q2 2010 dropped to US$2.2 billion, a significant decline from the US$5 billion in total deal value from Q1 2010.

While the pace of deal activity, as measured by the volume and value of transactions, remains above the recession lows of Q1 2009, the overall deal market recovery took a relative pause in Q2 2010.

• During Q2 2010, there were seven announced deals worth US$50 million or more, a drop from the eight deals reported in Q1 2010.

• In Q2 2010, no mega deals (transactions of US$1 billion or more) took place, which drove average deal values downward. This represents a decline when compared to the two mega-deals announced in the first quarter of 2010 and full year 2009.

• Despite the absence of mega-deals, the pace of activity in large and middle-market deals is similar to Q1 2010 and 2009, however; the majority of deals were with undisclosed values or those with disclosed values under US$50 million.

Additionally, the absence of financial acquirers during Q2 2010 represents a departure from their relative level of activity in Q1 2010 when they accounted for 20% of deals worth US$50 million or more and in 2009 when they accounted for nearly 11% of deals.

“Looking ahead, we will likely see strategic acquirers continuing to dominate deal-marking with intermittent increases in financial investment,” says Mario Longpré, national leader of the Aerospace and Defence practice, PwC. “Improved capital markets and a recovery in the global economy will likely help drive overall deal totals in the sector, which makes us cautiously optimistic as we look ahead to the second half of 2010.”

While it’s uncertain if deal activity in the A&D sector will return to the levels seen in the first quarter of 2010, there are positive signs the overall deal market will continue an upward climb.