Welcome to the first edition of the 2008 US aerospace & defense M&A insights report. In the past decade, the US aerospace and defense (A&D) industry has evolved from consolidation of like businesses to acquisition of complementary services, spurred by 9/11, wars in the Middle East and increased focus on national and global security. Complementary businesses include IT and security consulting; software, surveillance, global positioning and communications equipment and services; maintenance and aftermarket services; and critical materials and resources.
For the first six months of 2008, deal volume declined slightly to 53 deals from 67 in the first half of 2007. In closer examination of the six month deal volume, the%age of deals involving A&D companies diversifying into complementary businesses increased from 34% in 2007 to 47% in 2008, while A&D companies acquiring A&D targets remained constant at 21% for 2007 and 2008. This supports the shift in the industry which provides opportunities for key industry players to expand their offerings and win a larger share of the US defense contracts and the aerospace market.
Although strategic A&D acquirers had been more active since 2007, their private equity counterparts were fairly active with several exits and notable acquisitions. Inbound activity (non-US buyers purchasing US A&D targets) increased as the depressed dollar made outsourcing in and entry into the US A&D market cheaper. This report offers deeper insights on the changing A&D industry and highlights the key trends likely to drive deal activity in the next six to 12 months.
