MONTREAL, May 19, 2011— Merger and acquisition (M&A) activity in the Canadian aerospace & defence (A&D) sector exceeded expectations in the first quarter of 2011 with the pace of activity rising significantly this quarter compared to 2008-2010 levels. Globally, it was the highest first quarter total for announced deals the global A&D sector has seen in more than 30 years, according to a new PwC deals report.
Q1 saw the announced acquisition of Canada’s Vector Aerospace by Eurocopter, a subsidiary of EADS, for US$611 million—the largest Canadian deal in the A&D space in more than three years. There have been no deals of this magnitude in the Canadian A&D sector since the fourth quarter of 2007 when Sweden’s Hexagon AB acquired Canada’s Novatel for US$430 million.
A global PwC report shows the first quarter also saw a resurgence of large deals in the global A&D sector. In Q1 2011, there were 17 deals with values more than US$50 million amounting to US$9.5 billion, compared to just 10 deals worth a total of US$5.7 billion in Q1 2010. This is a 67% increase in global deal value and 70% rise in deal volume year-over-year. There were also six “mega deals” (transactions more than US$250 million) in Q1 globally, an increase from five for the same period in 2010.
“The big deals were back in the first quarter globally, with the acquisition of Canada’s Vector Aerospace taking third place honours,” says Mario Longpré, national aerospace and defence leader, PwC.
With the cyclical nature of transactions in the A&D sector, Canada is tracking ahead when compared to the previous economic recovery cycle from 2002–2005. During that time period, transactions in the Canadian A&D sector averaged US$834 million per year on an average of just under two transactions per year. This compares to the global averages of US$15.5 billion and just under 31 transactions per year. For 2011, we expect a reversion to the mean in terms of the number of deals and average value of transactions as the global economy continues to rebound and more companies, both within and outside of Canada, resume the search for growth prospects in the A&D sector.
The outlook looks positive for increased deal activity in the Canadian A&D sector pending potential risks associated with the strong Canadian dollar and rising fuel prices. So far, the second quarter has provided an additional lift as Canadian Helicopters Group acquired New Zealand’s Helicopters Pty Ltd last month for about $125 million.
PwC expects four key themes for the Canadian A&D sector for the remainder of 2011:
For a copy of Mission Control, PwC’s quarterly analysis of M&A activity in the global A&D sector, visit: www.pwc.com/ca/aerospace-defence.
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PwC’s Deal Team (www.pwc.com/ca/deals) helps clients to achieve deal success—from concept to close and beyond. As part of the world’s largest Transaction Advisory practice , and with our global Corporate Finance group being 2010 Upper Mid Market M&A Advisor of the Year , the PwC Canada Deals Team is your gateway to an exciting new world of emerging M&A opportunities.
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