Mission control: Fourth-quarter 2014 aerospace and defense industry mergers and acquisitions analysis

February 2015
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Mission control: Fourth-quarter 2014 aerospace and defense industry mergers and acquisitions analysis

At a glance

Analysis of deal activity in 2014 revealed a significant improvement in transaction activity after a lackluster 2013, with a notable pickup in defense-related transactions. The total deal value, $22.3 billion, was slightly above the 10-year rolling average of $21.2 billion. The number of megadeals, or transactions of $1 billion or greater, doubled from 2013 and included the first defense-oriented megadeal since the Budget Control Act of 2011.

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Mission control is PwC's quarterly analysis of merger and acquisition (M&A) activity in the global aerospace & defense sector. It provides an overview of the most recent M&A results and our expectations for future deal activity.

Highlights of what this quarter's analysis revealed:

  • Demand for companies with advanced, niche technologies that have commercial applications such as those in cyber, electronics, and autonomous and unmanned aerial vehicles (UAV).
  • Divestitures and spin-offs popular among aerospace and defense companies due, in part, to the desire to exit businesses directly impacted by decreased military spending.
  • Robust transaction activity in the fragmented and high-margin maintenance, repair, and overhaul (MRO) business supported by rising passenger traffic and higher utilization rates in growing regions.
  • Some increase in cross-border deals likely as austerity improves the rationale for Western cross-border defense consolidation and joint ventures.
  • Renewed interest from private equity and other financial investors in the A&D space due to stable revenue and strong orders in the commercial space.
  • Supply chain consolidation may gain momentum as suppliers, as well as those in commercial aerospace, feel the pressure to more efficiently manage supply chains and distinguish themselves through higher quality and timeliness.

Download the analysis to review all the key trends from 4Q14.

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