Global aerospace and defense deals insights: Q3 2018

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Executive summary

Deal activity in the global aerospace and defense sector has been driven by an increased focus on emerging technologies, intensified competition, and rise in government spending to modernize the defense IT infrastructure.
A&D companies are focusing on acquisitions beyond portfolio reorganization and adding capabilities in high-growth emerging technologies, such as cybersecurity, cloud computing and C4ISR. Both strategic and financial investments continue to increase steadily in these technologies.

The Asia Pacific region remains a strong driver for commercial aerospace transactions due to fleet expansion and continued capital inflows to aircraft leasing. Consolidation continues among suppliers in fragmented segments, such as aero-structures, and repair and overhaul (MRO) providers.

Further, a higher focus to improve technology infrastructure is pushing a wider number of non-traditional and financial buyers to target more diversified IT service organizations.

These factors along with positive macro trends, such as a strong US economy and higher global defense spending, are expected to drive M&A activity for the rest of 2018 and 2019.

Key trends/highlights

  • Deal value in 2018 YTD was $30.3 billion. Despite it being 49% below 2017 YTD, it is 48% above the ten-year annual deal value average of $21.3 billion and on track to be a strong follow-up to the 2017 record year. Deal volume declined in 2018 YTD by 18% over 2017 YTD, but remained slightly higher than the ten-year average.
  • Average deal size in 2018 YTD was $267.9 million, 40% less than 2017 YTD, but 47% higher than ten-year average of $69.5 million. The absence of megadeals primarily contributed to the decline.
  • A $3.8 billion joint venture was the largest deal announced this quarter, accounting for nearly 67% of total value.
  • At the regional level, 80% of deal value (as acquirer) remains with North America and 66% of global deal value was from cross-border deals.

“…emerging technologies, intensified competition, and rises in government spending…. These factors along with positive macro trends, such as a strong US economy and higher global defense spending, are expected to drive M&A activity for the rest of 2018 and 2019.”

Bob Long, US Aerospace and Defense Deals leader

Contact us

Bob Long
US Aerospace and Defense Deals leader, PwC US
Tel: +1 (703) 918 3025
Email

Scott Thompson
US Aerospace and Defense Leader, PwC US
Tel: +1 (703) 918 1976
Email

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