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Aerospace, Defense and Security enjoys record-breaking year

Aerospace, Defense and Security enjoys record-breaking year

  • United Kingdom
  • Diversified industrials - Aerospace, defence and security

19-02-2018

The global aerospace and defense industry experienced a record year in 2017 thanks to strong M&A activity in the sector, according to analysis by PwC [source: Defense News].

The value of deals from last year totals more than $72 billion, surpassing the previous $67 billion record set in 2015. Examples included United Technologies Corporation’s acquisition of Rockwell Collins in September 2017 for $30 billion and Safran’s $8 billion acquisition of Zodiac Aerospace.

PwC attribute strong activity in the defense industry to geopolitical tensions, a growing emphasis on missile defense in light of an emerging North Korean threat and the Trump administration’s push for increased defense budgets. Other catalysts include plans by contractors to invest in emerging technologies that will play a crucial role in the Defense Department’s Third Offset Strategy, which includes autonomy, artificial intelligence, robotics and cyber.

North America remains the most active acquirer, with the US accounting for 32 percent of targets. The UK and Eurozone as well as the Asia and Oceania zones were the next most active regions, despite Europe’s contribution as an acquirer dropping 20 percent for the year. The report attributes this drop to the region’s “more diplomatic stance to a changing geopolitical landscape".

Alistair Cree, Co-Head of Eversheds Sutherland’s Aerospace, Defense and Security sector group, said: 

“Geopolitical tensions have long played a central role in the growth of the sector, with concerns over Russia’s increased military prowess and what this means for its European near neighbours being a key driver, but rising tensions between North Korea and the US have accelerated such growth to record levels. The recent adoption of new technologies within the sector such as additive manufacturing for safety-critical parts has, to an extent, allowed suppliers to effectively ‘catch up’ with a huge backlog of demand, but whether or not this growth is sustainable has yet to be seen. If the development of technology does not drive sufficient organic growth within the sector to satisfy increased demand, my feeling is that we are likely to see more aggression within the M&A market (particularly at the supply chain level). We may also see financial buyers and investors becoming increasingly prominent, Melrose’s hostile pursuit of GKN being an interesting case in point – defense strategies will need to be at the ready!”

Eversheds Sutherland’s Aerospace, Defense and Security sector group was voted #1 in the Mergermarket league table for ADS in 2017. The sector group, jointly led by Alistair Cree and Dr. Christian Mense focuses on a full range of issues for ADS clients.

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