M&A activity slows in the global aerospace and defence sector

MONTREAL: Merger and acquisition (M&A) deal activity in the aerospace and defence (A&D) sector has slowed in Q2 2010 compared to the previous quarter, according to a PricewaterhouseCoopers (PwC) report—Mission control: Second-quarter 2010 global aerospace and defence industry M&A analysis.

According to the report, the total value of announced deals for A&D in the second quarter dropped to US$2.2 billion from US$5 billion in the previous quarter.

And while the pace of deal activity—which is measured by the volume and value of transactions—remains above the recession lows of Q1 2009, the overall market has taken a pause in Q2 2010.

The PwC report said there were seven announced deals worth US$50 million or more, a drop from the eight deals in the previous quarter. There were no “mega deals” (transactions worth US$1 billion), driving the average deal values down. But despite the absence of “mega-deals” the pace of the activity in large and middle market deals is similar to those in Q1 2009 and 2010.

The report also indicates that the absence of financial acquirers during Q2 represents a departure from their relative level of activity in the previous quarter when they accounted for 20 per cent of deals worth US$50 million compared to in 2009 when they accounted for about 11 per cent of deals.

Mario Longpre, national leader of the aerospace and defense practice for PwC says we will likely see strategic acquirers continuing to dominate deal-marking with intermittent increase in financial investment.

Although it’s uncertain if deal activity will return to the levels seen in Q1, PwC says there are positive signs the overall deal market will continue an upward climb.