Last year’s Aerospace & Defense merger & acquisition activity highlighted the underlying structural characteristics of an industry dominated by an airframe duopoly, powered by a handful of engine makers, and the reactive efforts of a vast consolidating supply base. Airbus and Boeing sought to expand their dominance by: completing transactions with smaller regional aircraft, bringing work back in house, and extending profitability over the life of an aircraft. Meanwhile, suppliers worked to counter balance OEM pressures by combining and building out complete systems capabilities. Private equity investors have become integral to the consolidation of a previously highly fragmented supply base, enabling founders to retire from companies which in many cases have expanded beyond the financial suitability of individual ownership.
Ian Cookson, Managing Director at Capstone Headwaters, commented, “Structural factors underlying sector M&A of dominant OEMs and a consolidating supply base are likely to continue for years to come. However, the level of activity is likely driven by economic temperature, ambitions of industry participants, and is particularly sensitive to potential Asia Pacific shocks.”
In our 2018 Aerospace & Defense Outlook: Mergers & Acquisitions Update, we discuss major industry themes highlighted by M&A activity. The report also discusses: