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.


 
 

 

Headlines October 29, 2014

News: Unmanned rocket explodes just six seconds after taking off - A NASA rocket due to be visible across the East Coast on its way to the International Space Station has blown up on the Launchpad. IG: Former chief of wounded warrior office broke law, DOD regs - The Defense Department inspector general has recommended “corrective action”...
 
 

News Briefs October 29, 2014

F-35C makes first landing at Virginia Beach Navy base The Navy says an operational F-35C joint strike fighter has landed at Naval Air Station Oceana for the first time. Naval Air Station Oceana is the Navy’s master jet base on the East Coast. The Navy says the plane came to the Virginia Beach base Oct....
 
 

Time to turn to American technology for space launch

For the first time since the Cold War, the United States has deployed armored reinforcements to Europe. To counter Russia’s aggression, several hundred troops and 20 tanks are now in the Baltic. Yet the U.S. military is still injecting millions into the Russian military industrial complex. In late August, the United Launch Alliance – the...
 

 
Air Force photograph by Joe Davila

Boeing, Air Force demonstrate Minuteman III readiness in flight test

Air Force photograph by Joe Davila Boeing supported the launch of an unarmed Minuteman III intercontinental ballistic missile at Vandenberg Air Force Base, Calif., on Sept. 23, 2014. Boeing supported the U.S. Air Force’s succ...
 
 

Pentagon going to court for refusing to release Sikorsky data

PETALUMA, Calif. – The Pentagon is refusing to release any data on any prime contractors participating in the 25-year-old Comprehensive Subcontracting Plan Test Program. The American Small Business League launched a program in 2010 to expose the fraud and abuse against small businesses the CSPTP had allowed. As a test the ASBL requested the most...
 
 
Northrop Grumman photograph

Raytheon Griffin C flight tests demonstrate in-flight retargeting capability

Northrop Grumman photograph Northrop Grumman has received a contract from the U.S. Marine Corps for low-rate initial production of the AN/TPS-80 Ground/Air Task Oriented Radar (G/ATOR). G/ATOR is the first ground-based multi-mi...
 




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>