Global aerospace and defense deals insights: Q3 2019

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Executive summary

While deal volumes softened in the third quarter, values were buoyed by three relatively significant transactions, most notably Advent/Cobham. Comparisons to the immediately preceding quarter are heavily skewed by the UTC/Raytheon transaction, but when viewed in light of a longer cycle, the quarter was largely in line with trends. Confidence in deal making continues to be bolstered by a strong defense spending profile and steady growth in passenger traffic supporting commercial backlogs. Our view is that these factors will drive M&A in the final quarter of 2019 and beyond.

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“Confidence in deal making continues to be bolstered by a strong defense spending profile and steady growth in passenger traffic supporting commercial backlogs. Our view is that these factors will drive M&A in the final quarter of 2019 and beyond.”

Bob Long, US Aerospace and Defense Deals Leader

Trends and highlights

  • Total deal value for YTD 2019 increased by 2.8x to $80.3 billion when compared with YTD 2018, largely as a result of the UTC/Raytheon transaction. A similar increase can be seen when comparing to the ten-year average. That transaction contributed more than 65% of the total deal value for YTD 2019.
  • The total deal volume for YTD 2019 declined by 8% to 316 deals when compared to YTD 2018, but remained flat when compared with the ten-year average.
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Highlights of deal activity

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Key announced transactions (YTD 2019)

Announced

Target name

Target nation

Acquirer name

Acquirer nation

Status

Deal value*

Category

06/09/19

Raytheon Co.

United States

United Technologies Corp.

United States

Pending

52,000

Electronic Equipment

04/05/19

Guangzhou Shipyard International Co. Ltd.

China

China CSSC Holdings Ltd.

China

Pending

8,647

Arms and Vehicles

07/25/19

Cobham PLC

United Kingdom

AI Convoy Bidco Ltd.

United Kingdom

Pending

4,924

Aircraft and Parts

01/31/19

Daewoo Shipbuilding and Marine Engineering Co. Ltd.

South Korea

Hyundai Heavy Industries Co. Ltd.

South Korea

Pending

1,981

Arms and Vehicles

07/29/19

Exotic Metals Forming Co. LLC

United States

Parker Hannifin Corp.

United States

Completed

1,725

Aircraft and Parts

07/30/19

Ontic Engineering and Manufacturing Inc.

United States

CVC Capital Partners VII LP

United Kingdom

Pending

1,365

Aircraft and Parts

08/09/19

Wesco Aircraft Holdings Inc.

United States

Pattonair Ltd.

United Kingdom

Pending

1,123

Supporting Services

07/20/19

AVIC Shenyang Liming Aero-Engine Group Corp. Ltd.

China

Investor Group

China

Pending

945

Aircraft and Parts

06/25/19

Bombardier Inc.-CRJ Regional Jet Business

Canada

Mitsubishi Heavy Industries Ltd.

Japan

Pending

750

Aircraft and Parts

01/30/19

LGS Innovations LLC

United States

CACI International Inc.

United States

Completed

750

Software and Security Systems

Source: Thomson Reuters and other publicly available sources. *In Million USD


Aerospace and defense deals outlook

The third quarter of 2019 represented a continuation of strong deal making in the sector. We see the growing presence of financial sponsors and the announcement of several very large transactions as evidence of the confidence inspired by strong defense spending and KPIs in the commercial space. Valuations have not settled back from their trend and volumes, though a bit softer in the quarter, are largely on track with recent history. Additionally, the new power player formed by the UTC/Raytheon transaction may spur additional activity as companies seek inorganic paths to keep pace. There can be no question that geopolitical factors and other broader issues such as Brexit can impact this sector quickly and drastically. However, we believe the fundamentals are in place for continued strong activity on a broad basis.

About the data

The information presented in this report is an analysis of deals in the global aerospace and defense industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into one of the 14 aerospace and defense industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to aerospace and defense or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between October 1, 2016 and September 30, 2019, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Bob Long

Aerospace and Defense Deals Leader, PwC US

Scott Thompson

Aerospace and Defense Leader, PwC US

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