Aerospace & Defense M&A Takes Off in Q3 2017

October 26, 2017

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By Scott Thompson

For the third quarter of 2017, A&D saw $44 billion in deal value. After three quarters, 2017 is already a record year for aerospace & defense M&A.  Year-to-date deal value as of September 30, 2017 was $62 billion, equaling the record for the full year of 2015.  2017 was already above average at the midpoint, but then two mega deals were announced in the third quarter – UTC’s $30 billion acquisition of Rockwell Collins and Northrop Grumman’s $9 billion acquisition or Orbital ATK, which ensured record status for the current year.

UTC’s acquisition of Rockwell Collins is the second largest in industry history, after the Berkshire Hathaway acquisition of Precision Castparts, while Northrop Grumman’s acquisition of Orbital ATK falls in the top ten largest deals in industry history.

The Rockwell Collins acquisition is attributed by many to the commercial aerospace supply chain requiring greater scale in response to increased price pressure from the OEMs. Northrop’s acquisition of Orbital ATK is partly a response to investors’ expectations around capital deployment changing from “return of capital” to “investment for growth”.

Deal activity is against a backdrop of surging commercial aerospace demand and rising geopolitical tensions. Global tensions are driving higher defense budgets in the US as well as higher international demand, which has improved the growth prospects for defense.  Commercial Revenue Passenger Miles (RPMs) are growing above 7% year-to-date, and that’s after two consecutive years of over 6% growth and above 5% growth before that.  Commercial aviation demand is growing at a pace more than double the global economy since the Great Recession.  This growth in end markets will correlate to similar growth in new equipment, maintenance and services in the medium and longer term.

View the full third quarter A&D deals report here.

And for a deeper look into the national deals picture, see what my colleague, John Potter, our US Deals Sector Leader writes here.

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