Total and average deal values decline dramatically in first half of 2009
TORONTO, Sept. 21 /CNW/ - Economic instability has caused deal values in the aerospace and defence industry to plummet, according to the inaugural edition of the PricewaterhouseCoopers (PwC) LLP report, Mission control: Second-quarter 2009 global aerospace and defence industry mergers and acquisitions analysis. Though the absolute number of deals remains at record highs, the total deal value and average deal value declined dramatically in the first half of 2009 due to the global recession, lack of liquidity, and uncertainty about when the economic recovery will begin.
- There were just six deals announced in the first half of 2009 with
values at or greater than US$50 million. The total value for these
deals was just under US$600 million, a decline of 95% from the
US$11.7 billion announced in the first half of 2008.
- There have been no deals announced in 2009 with a disclosed value of
greater than US$1 billion, and the absence of these large deals has
resulted in a significant decline in average deal values.
- The average deal value for announced deals with a value of at least
US$50 million for 2007 and 2008 were US$654 million and
US$432 million, respectively. For first-half 2009, the average deal
value for deals worth US$50 million or greater was approximately
"The two most pervasive themes in first-half 2009 are that deal values have plunged, and small deals are becoming much more prevalent," said Mario Longpre, PwC Canada partner and leader of the aerospace and defence practice. "We're likely to continue seeing increased activity at the smaller and midcap end of the market, as some look to make smaller acquisitions as a strategic means to shore up gaps in their existing businesses."
Financial investors have remained on the sidelines as financing remains challenging compared to the first half of 2008. To date there have been just two deals announced with values of US$50 million or more involving financial investors, compared with six deals in the first half of 2008, a 67% decrease. Strategic investors have also experienced a decrease in deal activity involving acquisitions of US$50 million or more. In the first half of 2009, there have been four deals announced involving strategic investors compared to 20 deals in the first half of 2008, an 80% decrease.
Minority stake purchases are beginning to account for a larger portion of overall deal totals. In first-half 2009, minority stake purchases represented 67% of deals announced, compared to only 27% of deals announced in 2008 and 18% in 2007. Buyers and sellers in the aerospace and defence sector will likely continue to leverage minority stake purchases and joint ventures as they look for more creative structures in order to complete deals.
From a regional perspective, the Asia & Oceania has steadily become a more attractive region for acquisition targets since 2007. For deals worth US$50 million or more, the Asia & Oceania region accounted for 18% of acquired companies in 2007, 32% in 2008 and 33% in the first-half of 2009. North America, which accounted for 37% of total deals worth US$50 million or more in 2007, saw that percentage drop to 30% in 2008 and 17% in first-half 2009. As acquirers, the Asia & Oceania and UK & Eurozone regions dominated the level of activity, collectively accounting for 67% of deal volume and 79% of value in the first half of 2009.
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