Ethan Strassfield, Big4.com Staff Reporter
The deal values in the aerospace and defense (A&D) sector saw a large decline due to the recent recession and the banking crisis of 2008 which continued till the first quarter of the year 2009. While the deal values have increased gradually in the last few months, small deals are still dominating the scenario. This has been observed by ‘Mission Control’, PwC’s annual review of merger and acquisition activity in the global A&D industry.
Overall, the deal activity as measured by the total number of deals has remained buoyant as companies have limited their acquisition budgets but continue to make strategic purchases by taking advantage of opportunities. With deal activities staying at a high, values have also increased gradually. The average value of bigger deals (US$50 million or above) fell nearly 27% to reach US$379 million in 2009 from US$519 from 2008. The total value of these deals dropped from 62% (US$20.8 Billion) in 2008 to just US$7.9 billion in 2009. The total deal value in 2009 fell 54% year-on-year to reach US$10 billion, which is the lowest in the entire decade and 76% from US$41.6 billion which was in 2007.
The market continued to experience a flow of deals which reflects a growth in the security and surveillance sector. When credit markets continue to ease along with the growing stock markets, the strategic acquirers will have more financial flexibility to consider bigger targets in 2010. The main consideration would be the economic indicators in the first half of the year. The two largest deals of 2009 were the General Atlantic’s US$1.65 billion deal for TASC and Boeing’s US$1 billion coup of the Vought production facility.
Neil Hampson, global aerospace and defence leader, PricewaterhouseCoopers, said, “US companies continued to dominate the vast majority of overall deal value in 2009. Deals with US targets and/or acquirers accounted for 84.4% of deal value, an increase over the 72.6% achieved in 2008. In the fourth quarter of 2009 all three deals involved US acquirers and US targets. The US dominance continues the trend away from years such as 2004 and 2006 when there was a much more balanced profile between Europe and North America. However, by 2008, the UK and Eurozone represented only 28% of deals and fell further to just 9.5% in 2009.”
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