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 August 31, 2015

News: Pilot killed in crash was helping wounded veterans – A pilot who died in a small plane crash in the desert northeast of Los Angeles was giving free glider rides to wounded military veterans. Turkey carries out first air strikes as part of anti-Isis U.S. coalition – Turkish fighter jets have carried out their first air...
 
 

News Briefs August 31, 2015

Pakistan officials: U.S. envoy discusses Afghan peace efforts Pakistani officials say visiting U.S. National Security Adviser Susan Rice has discussed efforts to revive Afghan peace talks. Rice met with Prime Minister Nawaz Sharif and army chief Gen. Raheel Sharif Aug. 30. Two Pakistani officials say they discussed efforts to revive talks between the Afghan government...
 
 
Courtesy photograph

F-22 inaugural deployment to Europe

Courtesy photograph A pair of F-22 Raptors fly near the coastline of Panama City Beach, Fla. Four F-22 Raptors, one C-17 Globemaster III, and approximately 60 airmen arrived at Spangdahlem Air Base, Germany, to train with allie...
 

 
ILS photograph

Boeing-built satellite will create first global high-speed broadband network

ILS photograph The Inmarsat-5 F3 satellite launched Aug. 28 aboard a International Launch Services Proton Breeze M rocket from Baikonur, Kazakhstan. EL SEGUNDO, Calif.–When the third Boeing-built [NYSE: BA] Inmarsat-5 sat...
 
 

Civil Air Patrol joins total force ‘Airmen’

When conducting missions for the Air Force as the official Air Force auxiliary, the Civil Air Patrol is now included in the Air Force’s definition of the total force. CAP has provided 74 years of support to emergency services, aerospace education and cadet programs. In August 2015, the Air Force updated Doctrine Volume 2, “Leadership,”...
 
 
DOD photograph by Air Force MSgt. Adrian Cadiz

Carter announces manufacturing initiative to aid war fighters

DOD photograph by Air Force MSgt. Adrian Cadiz Defense Secretary Ash Carter announces the creation of a National Manufacturing Innovation Institute to produce hybrid electronics during a speech at the National Full Scale Aerody...
 




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=""> <s> <strike> <strong>