Aerospace and Defense Update: Second Quarter 2013
Deloitte Corporate Finance LLC
This quarter’s Aerospace & Defense Update, produced by Deloitte Corporate Finance LLC (DCF), summarizes recent transactions within this industry along with information on active buyers, current transaction valuation multiples and an overview of the public market’s perception of the industry.
- Industry M&A Volume: M&A activity in the aerospace & defense (A&D) industry increased in the second quarter of 2013 (Q2) as total deal volume increased 20% over the first quarter of 2013 (Q1) to 30 transactions, while deal volume over the last twelve month period ending Q2 (LTM) decreased by 18% from the same period a year earlier to 130 transactions.
- Industry M&A Value: The disclosed average deal value of A&D transactions remained flat in Q2 2013 compared to Q1 2013 at $88 million, while on an LTM basis, average deal value decreased 56% over the same period last year to $206 million.
- Capital Availability*: At the end of Q2, the public companies highlighted on page 4 had $86 billion of cash on-hand and $230 billion of capital availability (as defined by 3.5x LTM EBITDA plus total cash and less total debt). These figures represent an increase of 8% in cash on-hand and 9% in capital availability from one year ago, respectively.
- Private Equity Activity: Q2 2013 acquisitions involving private equity buyers (stand-alone platform acquisitions as well as add-ons to existing portfolio companies) increased 43% from Q1 2013 to 10 transactions, representing 33% of total quarterly deal volume. From an LTM perspective, private equity acquisitions decreased 34% from the prior period to 35 transactions, representing 27% of total deal volume.
- M&A Activity by Industry Sub-Sector: In Q2 2013, aerospace, defense, defense IT, and MRO deals represented 57%, 7%, 20%, and 17% of total A&D deal volume, respectively, compared to 56%, 24%, 8%, and 12% in Q1 2013. From an LTM perspective, aerospace, defense, defense IT, and MRO deals represented 48%, 17%, 22%, and 13% of total volume, respectively, compared to 35%, 29%, 21%, and 15% in the previous period.
- Commentary: M&A activity in the A&D sector is likely to pick up steam, driven by i) buyers’ access to cash and financing in a low interest rate environment; ii) short supply of available/reliable production capacity within the expanding commercial aerospace sector; iii) pressure for cost reduction/margin improvement leading to consolidation plays; iv) demand for a more diverse customer base; and v) growing alignment of expectations between bid and ask price.
*The public companies we track may change over between quarterly publications resulting in differences from prior documents.
Sources: Capital IQ
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