No Match Found
In 2023, deals in the aerospace and defense (A&D) sector continued to focus on mid-range value transactions in strategic areas, helping both corporate and private equity investors build out capabilities and programs. Dealmaking in 2023 was largely consistent with levels in 2022 with a few notable exceptions regarding space and propulsion systems deals.
A&D sector consolidation over the past decade increased the Department of Defense’s dependence on fewer suppliers for critical equipment, resulting in increased antitrust scrutiny. In addition to this scrutiny, the interest rate environment and the focus on high-growth emerging technologies may drive future M&A in the sector towards smaller transactions.
We expect the large defense prime contractors to pursue smaller assets in key growth areas such as unmanned aircraft, hypersonics, cyber and space. We expect the commercial aerospace sector to outpace overall global economic growth as the sector recovers to pre-pandemic levels. However, continued high fuel costs, supply chain issues, competition for talent and pressure to deliver sustainability initiatives (particularly carbon emission mitigation) are just some of the headwinds that could impact deal levels.
“We expect companies in the A&D sector to build out capabilities in areas such as space, hypersonic, sustainable fuels and cyber — focusing on emerging technologies as they rationalize their portfolios. 2024 M&A will likely see further strategic focus on strengthening supply chains and acquiring high-end labor talent to support growth.”