Business

August 2, 2013

China deal drives merger, acquisition activity in second quarter

Aerospace and defense merger and acquisition activity in the United States continues to be affected by sequestration and defense budget cuts in the second quarter of 2013.

However, China played a positive role in the deal market where the pace of Chinese-involved deals has increased year-to-date, according to PwC US.

In the two years since sequestration became law, there has been a lot of uncertainty, creating a soft deal market, particularly in U.S. defense merger and acquisition activity,î said Scott Thompson, PwCís U.S. aerospace & defense leader. ìHowever, we are starting to see a slight uptick in interest from U.S. defense companies. It will likely still be slow in terms of holistic defense M&A activity, but once the 2014 U.S. defense budget is set, it will provide more certainty and we may start to see increased momentum in deal making.

Deal volume remained consistent in the first two quarters of 2013, with both periods recording 12 deals worth more than $50 million. Deal value increased to $4.1 billion during the second quarter of 2013, compared to $1.9 billion in the first quarter of 2013. This increase in deal value was the result of one Chinese mega deal (worth more than $1 billion) in the second quarter of 2013 ñ the first mega deal of the year ñ that had a total value of $1.5 billion. However, the annualized rate of deal value is only slightly more than half the 10-year trailing average.

In the first half of 2013, there were 11 U.S. deals worth more than $50 million with a total value of
$2.5 billion, compared to six Asia & Oceania deals totaling $2.6 billion, three of which were Chinese local deals representing $1.8 billion. ìChina is continuing to increase funding for engine R&D and reduce dependence on foreign engine technology by prioritizing domestic development. This engine R&D consolidation is leading to an increase in Chinese deal activity as the nation is trying to move ahead domestically in this sector,î continued Thompson.

Aerospace also continues to lead M&A activity as the defense sector awaits for some more guidance. So far in 2013, there were 17 aerospace deals worth more than $50 million with a total value of $4.2 billion, compared to four defense deals totaling $1.3 billion. The number of aerospace deals announced in 2013 is on pace to rank the highest of any annual total since 2000, although deal value continues to be soft.

While we saw strategic investors dominate the A&D M&A market during the second quarter, weíre starting to see financial investors slowly ramping up their interest in A&D deal making,î said Thompson. They are interested in the aerospace market, but are also showing some interest on the defense side where theyíll look to buy when the opportunity arises. There are still a lot of questions, but weíre seeing some optimism and interest in wanting to do deals ñ itís just a matter of seeing the right assets come up.




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


 
 

 
NG-people2

Northrop Grumman names VP, mission assurance for Electronic Systems sector

Northrop Grumman has appointed Sonal B. Deshpande vice president of mission assurance for the company’s Linthicum-based Electronic Systems sector. In this position, Deshpande is responsible for mission assurance across th...
 
 
sikorsky-raider

Sikorsky S-97 Raider helicopter achieves successful first flight

Sikorsky Aircraft Corp., a United Technologies Corp. subsidiary, announced May 22 the successful first flight of the S-97 Raider™ helicopter, a rigid coaxial rotor prototype designed to demonstrate a game-changing combination...
 
 
NG-people

Northrop Grumman appoints VP, program manager ISR division

Northrop Grumman announced it has appointed Steve Lunny, vice president and program manager for the intelligence, surveillance and reconnaissance division within the company’s Information Systems sector. Lunny will report...
 

 

HELLADS laser completes development

General Atomics Aeronautical Systems, Inc. announced May 21 that the High-Energy Liquid Laser completed the U.S. government acceptance test procedure and is now being shipped to the White Sands Missile Range, N.M. At WSMR, the laser will undergo an extensive series of live fire tests against a number of military targets.  GAASI is a leading...
 
 
boeing-transaero

Boeing delivers Transaero’s first Next-Generation 737-800

Boeing May 22 delivered Transaero’s first Next-Generation 737-800. The airplane, sporting a new livery, arrived at Moscow’s Domodedovo Airport. Boeing May 22 delivered Transaero’s first Next-Generation 737-800. The airpla...
 
 
Boeing photograph

Boeing-upgraded French AWACS take flight

Boeing photograph A French AWACS aircraft patrols the skies as part of a routine mission. The French AWACS fleet is in the midst of the Mid-Life Upgrade that modernizes the capabilities on board. Initial operating capability of...
 




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>