Acquisition and mergers in the aerospace and defense sectors amounted to more than $19 billion in deals for the third quarter of 2011, placing this year on pace to break record 2007 levels, a business consulting firm reported yesterday.
The first nine months saw $34.8 billion in deals, more than doubling the figure for the same period last year, PricewaterhouseCoopers (PwC) said. If the fourth quarter of 2011 produces $7.3 billion in mergers, than it will exceed the yearly total of $42.1 billion set in 2007.
There were eight agreements in the third quarter valued at more than $50 million, but the biggest splash was made by United Technologies’ [UTX] $16.1 billion acquisition of aerospace and defense company Goodrich [GR].
United Technologies announced last month that it had reached an agreement to buy Goodrich for a value of $18.4 billion that includes $1.9 billion in assumed debt (Defense Daily, Sept. 23).
About 70 percent of Goodrich’s $8 billion in sales are in the aerospace sector. Goodrich provides systems to a number of new and next-generation commercial aircraft, including the Boeing [BA] 787 and 737 Next-Generation, and the Airbus A350 and A380.
Once completed, the deal would be the largest acquisition in the history of aerospace and defense acquisitions, PwC said.
The United Technologies-Goodrich arrangement boosted the average value of 2011 acquisitions to $892 million, well above the $357 million average during the first nine months of 2010, PwC said.
Aerospace and defense “companies are continuing to improve their cash positions and should be able to put more of their cash to work in larger acquisitions,” said Scott Thompson, PwC’s leading analyst for aerospace and defense.
Thompson said growth in the commercial sector was driving investment interest and allowing sellers a higher value, while the portfolio in the defense sector was being driven by contraction, which will be a “significant driver of consolidation.”
“The dynamics are very different between commercial aerospace and defense,” he said.