Small is the name of the game in aerospace and defence sector deals, says

TORONTO, Nov. 27 /CNW/ - The global economic crisis continued to severely constrain global aerospace and defence (A&D) deal activity, as the total value of deals with disclosed values of at least US$50 million continued to decline on a year-on-year basis for the first three quarters of 2009, according to the PricewaterhouseCoopers LLP report, Mission control: Third-quarter 2009 global aerospace and defence industry mergers and acquisitions analysis.

    -   The pace of deals valued at US$50 million or more has slowed in 2009,
        falling 69% to 11 deals through the first three quarters of the year,
        compared to 36 deals in the first three quarters of 2008.
    -   However, the pace of deals valued at US$50 million or more has seen a
        sequential increase during 2009 from quarter to quarter: in the first
        quarter of 2009, there was only one A&D sector deal over
        US$50 million, four more were announced in the second quarter and six
        were announced in the third quarter of 2009, two of which were valued
        at more than US$500 million.

"While the market has experienced some signs of life regarding larger deals, we believe that small currently remains the name of the game," says Mario Longpré, partner and national leader for the Aerospace and Defence industry practice for PwC in Canada. "In the near term, we anticipate a limited amount of large deal activity in the A&D sector and a steady or increasing level of mid-market deal activity as buyers and sellers become more comfortable operating in today's changed financial and economic environment."

Year-to-date deal value has remained significantly constrained in 2009, relative to a year ago, due in part to limited activity by financial investors and persistent weakness in the capital markets.

    -   The total deal value for deals worth over US$50 million through the
        third quarter was US$2.5 billion, compared with US$16.1 billion for
        the same time period in 2008 (representing 15% of the deal value of
        2008 or a decrease of 544%)
    -   However, total deal value for deals over US$50 million, like deal
        volume, has seen a sequential increase in 2009 on a quarter-to-
        quarter basis, rising from US$433 million in the second quarter to
        approximately US$2 billion in the third quarter
    -   While the total number of deals in 2009 continues to increase, the
        total value of deals is US$4.2 billion compared with 2008's total
        deal value of over US$19 billion (representing 20% of the deal value
        of 2008 or a decrease of 352%)
    -   While year on year total deal values have decreased sharply,
        sequentially, deal values have started to pick up in 2009. Aircraft
        and part manufacturers represented 58% of deals versus 33% in 2008.
    -   Financials investors accounted for 25% of deals with values greater
        that US$50 million in 2008 dropping to 18% for 2009. With the
        exception of Boeing's acquisition of a facility previously owned by
        Vought Aircraft Industries, large deals in excess of US$1 billion
        continue to elude the A&D sector.

As the economy improves, large deal activity should continue to increase since sector constituents have had time to focus on balance sheet deleveraging and cost reduction, potentially leaving them better positioned to resume strategic actions.

When considering deal value by region where the target resides, North America was dominant representing 48% of total deal value, which may suggest acquirers have been taking advantage of foreign currency movements, specifically the devaluation of the US dollar. North America and Europe dominated acquirers by region, when measured by total deal value. While North America and Europe dominated deal value by acquirer, the number of deals during the first three quarters of 2009 was skewed towards Europe, accounting for over 45% of deals.

"The depth and global scale of the recession, the focus on the strengthening of balance sheets, and the significant degree of deleveraging, has forced some otherwise well run companies to seek strategic niche acquisitions as a means to support overall growth in an environment where organic growth remains difficult. Taking into account deal activity after previous recessions, deal values may be at or near the bottom, given the quarter on quarter improvement in 2009, which could potentially provide some comfort heading into 2010," concludes Mr. Longpré.

About PricewaterhouseCoopers LLP

PricewaterhouseCoopers ( provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP ( and its related entities have more than 5,300 partners and staff in offices across the country.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.


For further information: For further information: Kiran Chauhan, (416) 947-8983,; Carolyn Forest, (416) 814-5730,

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