Aerospace and Defense Update: First 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 declined in the first quarter of 2013 (Q1) as total deal volume decreased 40% over the fourth quarter of 2012 (Q4) to 25 transactions, while deal volume over the last twelve month period ending Q1 (LTM) decreased by 10% from the same period a year earlier to 139 transactions.
- Industry M&A Value: Disclosed average deal value of A&D transactions decreased 77% in Q1 2013 over Q4 2012 to $88 million, while on an LTM basis, average deal value decreased 56% over the same period last year to $207 million.
- Capital Availability*: At the end of Q1, the public companies highlighted on page 4 had $87 billion of cash on-hand and $223 billion of capital availability (as defined by 3.5x LTM EBITDA plus total cash and less total debt). These figures represent an increase of 18% in both cash on-hand and capital availability from one year ago.
- Private Equity Activity: Q1 2013 acquisitions involving private equity buyers (stand-alone platform acquisitions as well as add-ons to existing portfolio companies) decreased 36% from Q4 2012 to 7 transactions, representing 28% of total quarterly deal volume. From an LTM perspective, private equity acquisitions decreased 17% from the prior period to 40 transactions, representing 31% of total deal volume.
- M&A Activity by Industry Sub-Sector: In Q1 2013, Defense IT deal volume fell 82% over Q4 2012, followed by MRO, Defense and Aerospace by 25%, 25% and 22%, respectively. From an LTM perspective, deal volume of aerospace and defense IT increased by 15% and 3%, while deal volume of defense and MRO decreased by 42% and 20%, respectively.
- Commentary: The President’s FY2014 defense budget request was released on April 10 at $527 billion of discretionary spending and a total budget authority of $533 billion. The request included a placeholder for Overseas Contingency Operations funding, which was updated on May 17 at $79.4 billion. We continue to see uncertainty related to the budget resolution process and the impact of sequestration in the short term and long term.
*The public companies we track may change over between quarterly publications resulting in differences from prior documents.
Sources: Capital IQ, Thomson Financial, DCF A&D Update Q4 2012
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