Mission control: 2010 annual and fourth-quarter review

Welcome to Mission control, our review of merger and acquisition (M&A) activity in the global aerospace and defence (A&D) sector. The “Mission control” series provides a quarterly window on A&D deal activity and this annual edition combines fourth-quarter data with a review of the whole of 2010.

Deal activity has recovered strongly in 2010, as companies responded to a challenging procurement environment in the defence sector and an improving competitive environment in commercial aerospace. We are seeing a continuation of the high volume of deal activity coupled with a significant increase in average deal value.

Key trends:

  • Deal values rise significantly
    Deal value in the A&D sector bounced back strongly in 2010 after the trough of the previous year. Total deal value nearly doubled year-on-year, from US$10.9 billion in 2009 to US$20.2 billion in 2010.
  • Large deal sizes edge upwards
    Although mega deals remained absent in 2010, the largest deal sizes are tracking a defi nite upward trend. There were four US$1bn plus deals in 2010.
  • Deal momentum comes from a number of fronts
    With competition and security concerns giving limited opportunity for further consolidation among the largest companies, the deal spotlight remains on lower tier consolidation and moves by private equity investors.
  • Further deal growth likely in 2011
    Some strong themes will continue to assert themselves in 2011: divestiture of non-core assets, consolidation between mid-tier companies in the security and aircraft production sectors, realignment around new priorities such as cybersecurity, and strengthening of new technology capabilities. This realignment in the industry could potentially drive some mega transactions in 2011.

Featured special report:

Repositioning for growth: The implications of expanding into an emerging global market
The special report takes a closer look at how globalisation is accelerating within the aerospace and defence (A&D) industry. With an established international customer base, the A&D industry is positioned to overcome globalisation challenges and reap benefits in commercial markets in Asia-Pacific and defence markets in the Middle East and Asia. Additionally, A&D supply chain markets are opening up in India, Mexico, and Turkey, as well as China for commercial aerospace, as most emerging country governments also view foreign investment as an important source of capital for their economies.