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Aerospace and Defense Update: Fourth Quarter 2013

Deloitte Corporate Finance LLC


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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.

Highlights include:

  • Industry M&A Volume: M&A activity in the aerospace & defense (A&D) industry increased in the fourth quarter of 2013 (Q4) as total deal volume increased 50% over the third quarter of 2013 (Q3) to 36 transactions, while deal volume over 2013 decreased by 21% from 2012 to 115 transactions.
  • Industry M&A Value: The disclosed average deal value of A&D transactions increased 66% in Q4 2013 compared to Q3 2013 at $200 million, while on a last twelve month (LTM) basis, average deal value increased 3% over the same period last year to $125 million.
  • Capital Availability*: At the end of Q4, the public companies highlighted on page 4 had $87 billion of cash on-hand and $242 billion of capital availability (as defined by 3.5x LTM EBITDA plus total cash and less total debt). These figures represent a decrease of 3% in cash on-hand and an increase of 2% in capital availability from one year ago, respectively.
  • Private Equity Activity: Q4 2013 acquisitions involving private equity buyers (stand-alone platform acquisitions as well as add-ons to existing portfolio companies) decreased 17% from Q3 2013 to 10 transactions, representing 28% of total quarterly deal volume. From an LTM perspective, private equity acquisitions decreased 17% from the prior period to 39 transactions, representing 34% of total deal volume.
  • M&A Activity by Sub-Sector: In Q4 2013, aerospace, defense, defense IT and MRO deals represented 42%, 20%, 22% and 17% of total A&D deal volume, respectively, compared to 46%, 25%, 17% and 13% in Q3 2013. From an LTM perspective, aerospace, defense, defense IT and MRO deals represented 50%, 18%, 17% and 15% of total volume, respectively, compared to 39%, 24%, 24% and 13% in the previous period.
  • Commentary: Disruptive events in 2013 such as the passing of the sequester deadline in March and the US government shutdown in September continued to lend an air of uncertainty toward future defense spending. Notwithstanding, M&A objectives related to consolidation, efficiencies, diversification and entry into new markets or new technologies continue to fuel transactions. Within commercial aerospace, the acquisition appetite among many suppliers remains at elevated levels as the industry experiences production rate increases as well as OEM pricing pressure.

Sources: Capital IQ

To learn more, download the Aerospace & Defense Update.

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