Strong M&A activity in the global aerospace and defense sector was largely driven by global passenger air traffic growth, increasing competition and US defense spending as concerns for national security intensify.
Commercial aviation is expected to turn in a strong performance in 2018 with 7% growth in RPK (revenue passenger kilometers) and a growing need for fleet expansion in Asia Pacific.
Profitability risks due to strong competition might serve as an incentive for industry consolidation as companies may have to look for strategic growth opportunities and supply chain synergies. Further, the ongoing trade tensions amongst the US, China, and Mexico on rising tariffs is also likely to put pricing pressure on players and impact profitability.
Geopolitical tensions continue to drive defense spending and the wave of consolidation in the government services space does not appear to be waning in any meaningful way.
We believe the factors impacting commercial aerospace and defense, as well as the industry’s liquidity position, bode well for continued strength in deal making.
“We believe the factors impacting commercial aerospace and defense, as well as the industry’s liquidity position, bode well for continued strength in deal making.”