Global aerospace, defence & security (AD&S) merger and acquisition (M&A) value reached a record level in 2011, according to Mission control, a quarterly analysis of M&A activity in the global AD&S sector
. Aggregate deal value reached $43.7 billion supported by 341 deals in 2011, compared to total deal value of $21.9 billion and 332 deals in 2010. The 2011 record surpassed the previous AD&S deal record of $42 billion in 2007.
The most significant trend affecting the aerospace, defence and security industry is the contrast in civil and military outlooks. The former is benefiting from fleet expansion in Asia, as well as fuel cost pressure that is supporting replacement demand in western nations. This growth potential is very attractive for potential acquirers. Although we may not see more deals on the scale of United Technologies’ $16 billion 2011 announcement, there will likely be more moves by defence contractors to establish themselves further in the civil market as well as more consolidation between aerospace suppliers. In addition, several emerging markets continue to develop their own domestic aerospace industries, which are acting as another spur for aerospace transactions.
While we may not see the record for the largest deal in sector history broken for some time, the weight of evidence suggests that 2012 will be another robust year.
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Can aircraft manufacturers prevent rate ramp-up problems?
According to PwC, high production rate ramp-up may be needed across much of the aerospace, defence and security sector in 2012 and beyond. A new generation of commercial aircraft, as well as the ramp-up of select military programmes, could put pressure on the supply chain, leaving programmes vulnerable to supply chain delays and failures.
PwC analysed the potential capacity risks in the aerospace supply chain and the analysis showed that a fifth (21 percent) of suppliers are not financially ready to support the high ramp-up ahead of them. Companies in the aerospace sector are generally alert to the need to proactively identify, prevent and manage supply chain risk. However, in many cases, current approaches to supply chain risk management are either too complex or too simple, leaving companies vulnerable to issues.