Global aerospace and defense M&A deal values plummet in first half of 2009, finds PwC

Mean Deal Value for First Half of 2009 Declines 91% Year-Over-Year

NEW YORK, August 13, 2009 — Economic instability has caused deal values in the aerospace and defense industry to plummet, according to the inaugural edition of the PricewaterhouseCoopers LLP report, Mission control: Second-quarter 2009 global aerospace and defense industry mergers and acquisitions analysis. Though the absolute number of deals remains at record highs, the total deal value and average deal value declined dramatically in the first half of 2009 due to the global recession, lack of liquidity, and uncertainty about when the economic recovery will begin.

In the first half of 2009, there were just six deals announced with values at or greater than $50 million. The total value for these deals was just under $600 million, a decline of 95 percent from the $11.7 billion announced in the first-half 2008. There have been no deals announced in 2009 with a disclosed value of greater than $1 billion, and the absence of these large deals has resulted in a significant decline in average deal values. The average deal value for announced deals with a value of at least $50 million for 2007 and 2008 were $654 million and $432, respectively. For first-half 2009, the average deal value for deals worth $50 million or greater was approximately $99 million.

“The two most pervasive themes in first-half 2009 are that deal values have plunged, and small deals are becoming much more prevalent,” said Scott Thompson, U.S. aerospace & defense leader at PricewaterhouseCoopers. “We’re likely to continue seeing increased activity at the smaller and midcap end of the market, as some look to make smaller acquisitions as a strategic means to shore up gaps in their existing businesses.”

Financial investors have remained on the sidelines as financing remains challenging compared to the first half of 2008. To date there have been just two deals announced with values of $50 million or more involving financial investors, compared with six deals in the first half of 2008, a 67 percent decrease. Strategic investors have also experienced a decrease in deal activity involving acquisitions of $50 million or more. In the first half of 2009, there have been four deals announced involving strategic investors compared to 20 deals in the first half of 2008, an 80 percent decrease.

Minority stake purchases are beginning to account for a larger portion of overall deal totals. In first-half 2009, minority stake purchases represented 67 percent of deals announced, compared to only 27 percent of deals announced in 2008 and 18 percent in 2007. Buyers and sellers in the aerospace and defense sector will likely continue to leverage minority stake purchases and joint ventures as they look for more creative structures in order to complete deals.

From a regional perspective, the Asia & Oceania has steadily become a more attractive region for acquisition targets since 2007. For deals worth $50 million or more, the Asia & Oceania region accounted for 18 percent of acquired companies in 2007, 32 percent in 2008 and 33 percent in the first-half of 2009. North America, which accounted for 37 percent of total deals worth $50 million or more in 2007, saw that percentage drop to 30 percent in 2008 and 17 percent in first-half 2009. As acquirers, the Asia & Oceania and UK & Eurozone regions dominated the level of activity, collectively accounting for 67 percent of deal volume and 79 percent of value in the first half of 2009.

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