Mergers and acquisitions (M&A) activity across the global aerospace and defense (A&D) industry slowed in the third quarter, although the pace for 2014 is still head of that in 2013, PricewaterhouseCoopers (PwC) said in its quarterly report on M&A activity in the industry.
In the third quarter only six deals valued at at more than $50 million each were completed for a combined deal value of $781 million, two fewer deals than in the same period a year ago which were worth $3.6 billion, according to the PwC analysis. It says in the second quarter of this year 15 deals worth $10.9 billion were completed.
Through the first nine months of this year, 34 deals have been done worth $15.2 billion versus 30 deals value ad $9.6 billion in the same period a year ago, PwC said.
The report said that valuations for companies in the A&D sector remain “robust,” which has helped drive divestitures by defense companies. It also said that the “lofty valuations” also makes it difficult for some companies to make acquisitions.
“Divestitures and spin-offs remain very popular among aerospace and defense companies, with the volume of these types of deals on pace to hit a record high for 2014,” the accounting and consulting firm said. “The most common driver for the divestitures has been a desire to exit businesses that have been directly impacted by decreased military spending, including units that produce vehicles, electronics, and communications.”
PwC said that aerospace deal activity in the quarter was weaker than in recent quarters and in line with the A&D sector as a whole but going forward is expected to outpace the sector “as higher commercial aircraft production rates make vertical integration of the supply chain more attractive from a return standpoint.”
The report also said that given increased military funding for unmanned aerial vehicles (UAV) combined with increased commercial opportunities for these unmanned aircraft, there could be more interest in acquisitions of small UAV firms.