Acquisitions and mergers in the global defense and aerospace industry reached a record level last year, with six “mega” deals driving the market that topped $43 billion, according to a private study by a business consulting firm released recently.
The $43.7 billion aggregate valued deals in in 2011 included 341 mergers and acquisitions, led by United Technologies [UTX] $16 billion-takeover of Goodrich [GR], the Pricewaterhouse Coopers (PwC) report said. Before last year, 2007 was the largest in terms of value at $42 billion and 2010 in number of deals–332.
“We saw a wide-ranging mix of deals in 2011 as global aerospace and defense M&A activity reached record levels,” said Scott Thompson, the senior PwC analyst for aerospace and defense. “Larger deals became more common, driven by sales of slower-growth defense businesses and private equity exits, while smaller deals drove the bulk of deal volume as major players with ample liquidity focused on acquiring growth.”
U.S. companies played the largest role in the mergers, PwC said.
The consulting firm predicted that global activity in the aerospace sector will continue to grow on the commercial side over the next year, with fleet expansion expected in Asia and a strong replacement demand in Western countries.
PwC said the future on the defense side was uncertain because of declining government budgets expected to impact military spending, but affected companies are looking to expand into the commercial sector.
“Conversely, global deal activity in the defense sector is increasingly being impacted by the wave of government cutbacks in key markets stemming from fiscal retrenchment,” Thompson said. “The uncertain outlook is causing defense contractors to further globalize in the face of growing competition for a shrinking pool of business. These trends will play a major role in deal activity as the year unfolds.”