aerospace and defense, mergers and acquisitions

Perspectives

Trends in aerospace and defense mergers and acquisitions

Evolving focus areas and keys to value creation

​Megamergers in the aerospace and defense industry take a back seat while acquisition activity focused on delivering new markets and products gathers momentum.

Aerospace and defense mergers and acquisitions trends

In the aerospace and defense industry, mergers and acquisitions (M&A) as we know them have recently changed. Instead of megamergers for the purpose of cost savings and synergies, current aerospace and defense M&A activity focuses on acquisitions that deliver new products and offer expansion into markets such as Asia, the Middle East, and beyond.

While this is good news for the industry, aerospace and defense companies must understand the nuances of this change and prepare for the challenges and opportunities that result in executing a merger or an acquisition. For example, acquiring companies or investors must consider how to value a company that has a short financial track record, or has few competitors, or is in a country in which they have not previously operated. Integrating overseas has its own hurdles, potentially resulting in inefficient operations and failure to realize acquisition benefits.

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Getting ahead of the merger and acquisition challenges

To help companies overcome challenges that may surface during this next wave of aerospace and defense M&A, we analyzed M&A data and interviewed leading industry advisors. This report includes key findings that will help aerospace and defense companies re-evaluate their approach to value creation using M&A. We also discuss the impact of tax reform on valuation, and list challenges that acquirers may face along with potential solutions.

Below is our outlook from the report:
  • Near-term aerospace and defense M&A is likely to focus on growth.
  • Megamergers are likely to decrease in frequency while acquisitions of smaller targets could increase.
  • Acquisitions will be used to gain new capabilities, access emerging technologies, and geographic expansion.
  • Joint ventures and partnerships could replace outright mergers and acquisitions in some instances.

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​Pursuing growth via acquisition

Consolidation among original equipment manufacturers has given rise to several major players with the resources to pursue an aggressive and expansive M&A strategy. Aerospace and defense company investment in emerging technologies has introduced competition from adjacent industries, such as software.

Evolving customer relationships, regulatory changes, and potential tax reforms likewise complicate deal making. Once an acquisition deal is closed, integration should focus on how to scale the acquired assets and capabilities while considering cultural attributes and differences. Notwithstanding these challenges, M&A activity remains high.

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Get in touch

Bhuvanesh Abrol
Principal, Deloitte Consulting LLP
+1 213 593 3783
babrol@deloitte.com

Nicholas M. Florio
Aerospace & Defense Leader, Deloitte Risk & Financial Advisory
Principal, Deloitte Financial Advisory Services LLP
+1 212 346 3049

Jack Koenigsknecht
Partner, Deloitte & Touche LLP
+1 312 486 2354
jkoenigsknecht@deloitte.com

Scott Vickman
Partner, Deloitte Tax LLP
+1 612 397 4020
svickman@deloitte.com

 

 

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