TORONTO, July 14 /CNW/ - The Aerospace and defence sector deals remain
buoyant according to a survey released today from
PricewaterhouseCoopers (PwC): 'Flying High - Aerospace and Defence M&A'. The
total value of disclosed transactions for 2007 reached nearly $31bn, up from
$29.2bn in 2006. International deals came back strongly with total deal value
more than tripling to $14.4bn.
The bulk of mergers and acquisitions (M&A) activity remains centred in
North America and Europe with the US being the most significant investor in
2007. Of the top 10 deals, one was Canadian-KKR Sageview Capital's (a private
equity company) acquisition of ACTS, a provider of airframe, engine and
component maintenance, worth $0.7bn.
Transatlantic deals are back in force with the value of deals rising to
$12.6bn in 2007 from $1.9bn in 2006, the highest level we have on record. The
investment in both years continues to be concentrated between the US and
"The implications of this activity will continue to shape the structure
of the industry for the next decade," says Russell Goodman, National leader -
Transactions Advisory Services with PwC Canada. "M&A activity has shifted from
Europe to North America and is expected to continue growing. It is only
relatively recently that corporate investors have returned to the market and
they need to make up for lost time to position themselves appropriately for
the future. The most promising sign from 2007 is a significant rise in
transatlantic M&A, with money flowing equally and in large volumes in both
directions, as corporates acquire leadership positions in the key growth
sectors of the industry."
The UK Defence Industrial Strategy of 2005/06 paved the way for more
international investment in defence assets and the UK remains the world's
second largest aerospace industry. Two of the largest deals in 2007 were
therefore US/UK: GE's $4.8bn acquisition of Smiths Aerospace and JLL Partners'
$0.9bn acquisition of McKechnie Aerospace.
Another feature of M&A activity over the last two years has been the
emergence of Middle-Eastern investors: 2006 and 2007 saw the acquisition of
Doncasters and SRTechnics in competitive auctions from private equity owners.
Private equity participation in the sector continues to rise and average
deal size has grown from a low of $100m in 2003 to $280m in 2007, reflecting
the more strategic nature of deals, improved profits and higher multiples. The
credit crunch has put a temporary brake on private equity's ability to play in
the large deal market, but we continue to see plenty of activity in the
In defence, several major programmes in the US and Europe are in the
'ramp up' phase of production and ongoing military commitments in Iraq and
Afghanistan are supporting high demand for spares and overhaul.
The geographic investment profile seen in previous years was much more
balanced compared to three quarters of the $32.9bn invested in 2007,
concentrated on North America and only a quarter in Europe. This points to a
weaker M&A market in Europe and the strongest year in North America since
Of the 43 deals announced in the rest of the world in 2007, 25 were
investments in Brazil, Russia, India and China. Due to its growing budget and
increasingly favourable environment towards foreign ownership, India is the
country to watch.
In civil aerospace, backlogs for commercial aircraft reached an all time
high in 2007, with Boeing and Airbus having a combined 6,848 aircraft on order
by the end of the year. Their combined order intake of 2,754 in 2007, smashed
the previous high of 2,057 in 2005. As a whole, industry profit margins
continue to improve showing a consistent upward trend.
A full version of 'Flying High - Aerospace and Defence M&A' can be found
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