Merger and acquisition (“M&A”) activity in the commercial aerospace / business jet industry is in the midst of a several-year long, vibrant rebound. Through mid-August of 2012, acquirers announced 63 transactions of commercial aerospace suppliers. At that rate, the industry is on pace to total approximately 103 transactions for the full year 2012. As illustrated on the chart below, this level of activity is up significantly from the 83 transactions announced in 2011, 67 in 2010, and only 52 in 2009. So, if 2012’s pace holds, aerospace M&A transaction volume will have doubled over the past three years
What has caused the increase in M&A activity? Compare 2012’s deal-making pace with where the commercial aerospace industry was in 2009. In 2009, the global macroeconomy was suffering from the haymaker blow dealt by the near meltdown of the financial system, leading to extremely tight credit markets and – critically – anxious buyers who wanted to conserve cash. Moreover, 2009 witnessed lackluster orders by the two big OEs (Boeing and Airbus) and weak airline traffic. Fast forward to 2012. Many of the factors causing the weak M&A market for aerospace suppliers have improved.
While we are still in an uncertain global macroeconomic setting, the world economy is growing (albeit slowly), not shrinking. Credit markets for aerospace companies are healthy – financing is abundant, especially for larger firms. OE orders have skyrocketed (Boeing and Airbus are sitting on approximately 7 years’ worth of production) and airline traffic has improved, driving aftermarket demand. And buyers have returned with a vengeance, putting generally clean balance sheets to work.
M&A activity in the commercial aerospace / business jet sector has not been limited to a certain subsector or niche. As exhibited on the table below, the M&A tide has touched companies in parts and logistics support, engine components, sensor and inertial control manufacturers, aerostructures / composites, and even aircraft OEMs. With the tremendous visibility in commercial build rates, and a business jet market on the verge of a comeback, we expect aerospace M&A activity to remain robust for the foreseeable future.