U.S.

March 27, 2012

Aerospace, defense industry poised for a mergers, acquisitions boom

Following years of uncertainty, the aerospace and defense industry is on the brink of a mergers and acquisitions boom, according to a new Deloitte report.

Specifically, the study shows many companies are well-positioned to take strategic advantage of consolidation opportunities, particularly at the supplier level, due to pent-up demand, available capital and favorable valuations.

And, with the industry facing another year of expected flat performance, many executives are making it a high priority to strategically approach M&A in order to avoid decline.

However, as recent research on mergers and acquisitions activity across multiple industries shows, with as many as 70 percent of transactions failing to create long-term value, A&D leaders cannot afford to be wrong in their M&A pursuits.

Deloitte’s report, “Three Keys to M&A Effectiveness for A&D Executives: Capturing the Full Value of Strategic Acquisitions,” underscores the importance of careful planning prior to execution, and how it can prevent failure and ensure activity results in substantial growth for a company.

“Over the past 10 years we’ve seen the A&D industry stockpile cash as a result of success in continued operations, exhaustion of other cash deployment activities and economic uncertainty,” said Marty Hartigan, principle, Deloitte Consulting LLP and report co-author. “Merger and acquisition activity looks more appealing now as a cash deployment strategy after years of stock repurchases, dividend increases and discretionary contributions to pension obligations.”

Drawing on industry trends, the Deloitte report suggests A&D executives consider the following three key guidelines to ensure M&A effectiveness and maintain performance throughout the transaction:

  • Manage the demand of integration by limiting the total number of acquisitions
  • Make M&A central to a company’s growth strategy by implementing meaningful acquisitions
  • Target companies with business models that enhance the acquiring company’s market position

According to the Deloitte report, following these guidelines will enable companies to take full strategic advantage of new M&A opportunities and ensure they are prepared for the opportunities of the future that focus on operational and specific-supplier segments.

This is in stark contrast with the defense contractor mega-mergers of the past. Modern segment opportunities include “new reality” technologies such as cyber, unmanned, Intelligence Surveillance and Reconnaissance, precision attack, mission assurance, and logistical and energy-related services. Capitalizing on these opportunities may result in greater industry effectiveness and better competitive positioning of the company, the study notes.

“Recent U.S. Department of Defense budget cuts have brought renewed focus to competitive positioning,” said Tom Captain, vice chairman, Deloitte LLP and U.S. aerospace and defense leader. “Defense contractors need a strategy for growth to fill the pending revenue gap. Carefully planned and executed acquisitions can provide a transformational opportunity to gain new customers and to get into new products and services in this post-Iraq war era.”

The Deloitte report also provides insight on how to tackle integration challenges specific to the A&D industry, including concerns that overhead harmonization hurts competitiveness, integration can reduce overall company specialization, and the belief that the target’s intrinsic value is sensitive to integration activities.

To view “Three Keys to M&A Effectiveness for A&D Executives: Capturing the Full Value of Strategic Acquisitions,” visit www.deloitte.com/us/ma/3keys.




All of this week's top headlines to your email every Friday.


 
 

 

Headlines March 2, 2015

News: Israel lobbies for more missile defense funds than Obama sought - For the second consecutive year, Israeli officials have asked the U.S. Congress to add more than $300 million to President Barack Obama’s budget request for their nation’s missile-defense programs.   Business: Inside one of the most intense, and unusual, Pentagon contracting wars - The much-anticipated...
 
 

News Briefs March 2, 2015

Italy resumes Navy exercise amid new tensions over Libya The Italian Navy is resuming exercises in the Mediterranean Sea, including near the coast of Libya, amid concerns about rapidly deteriorating security in the North African nation. The exercise began March 2 and includes anti-submarine, anti-aircraft and anti-ship training operations. The exercise was suspended for a...
 
 
LM-AEHF

Ingenuity drives Lockheed’s AEHF program to production milestone early

Lockheed Martin has successfully integrated the propulsion core and payload module for the fourth Advanced Extremely High Frequency (AEHF) satellite nearly five months ahead of schedule. Reaching this critical milestone early a...
 

 

First all-electric propulsion satellites send first on-orbit signals

Two Boeing 702SP (small platform) satellites, the first all-electric propulsion satellites to launch, have sent initial signals from space, marking the first step toward ABS, based in Bermuda, and Eutelsat, based in Paris, being able to provide enhanced communication services to their customers. Whatís more, the satellites were launched as a conjoined stack on a...
 
 

GA-ASI, Sener team to offer Predator B to Spain

General Atomics Aeronautical Systems, Inc. and SENER, a leading Spanish engineering company, announced March 2 that they have signed a teaming agreement that promotes the use of the multi-mission Predator B® RPA to support Spain’s airborne surveillance and reconnaissance requirements.  GAASI is a leading manufacturer of Remotely Piloted Aircraft systems, radars, and electro-optic and relate...
 
 
raytheon-satellite

Raytheon’s ‘Blue Marble’ imaging sensor delivered on schedule

Raytheon has delivered a second Visible Infrared Imaging Radiometer Suite instrument to support the National Oceanic and Atmospheric Administration’s Joint Polar Satellite System mission. The second VIIRS unit will fly ab...
 




0 Comments


Be the first to comment!


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>