Dublin, June 03, 2021 (GLOBE NEWSWIRE) -- The "Mergers and Acquisitions in Aerospace and Defense Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)" report has been added to ResearchAndMarkets.com's offering.
The Mergers and Acquisitions in Aerospace and Defense Market is projected to register a CAGR of over 3% during the forecast period (2021-2026).
The COVID-19 pandemic has resulted in a global supply chain disruption, which has had a multifold impact on the aerospace and defense industry. Historically, the defense industry was insulated from international shocks because states tended to rely on domestic producers for critical military equipment. The diversified supply chain, which enabled the defense sector companies to act as systems integrators rather than industrial producers, has now resulted in increased transactional costs due to protectionism. Some major disruptions have also altered the production of several military equipments, while in some cases, the imposed trade sanctions have made it impossible for producers to maintain relationships with suppliers, especially with respect to high technology goods.
However, some of the defense contractors are better positioned since they will not feel the impact of COVID-19 in the short- to mid-term. While production may slow for the same reasons as in aircraft manufacturing, demand over the next two years is unlikely to be affected since budgets for these projects had been allocated prior to the pandemic and the projects are critical to national defense.
Mergers and Acquisitions (M&A) in the aerospace and defense (A&D) sectors has emerged as a commercially viable business strategy as it helps the participants enhance their technological know-how while dividing the risks associated with technological disruptions. An M&A facilitates the sustenance of both firms and in most cases helps the major players to foster comparatively faster growth than their competitors. M&As are not necessarily limited to the same sector and there are instances of such collaborations even in cross-sectors by firms to diversify and enhance their technological capabilities to effectively serve the specific requirements of a broader clientele. However, the acquisition of another firm comes with the associated drawbacks. A reckless decision and acquisition of a firm with huge debts can result in future losses for the acquiring company. Also, regulations associated with M&A can prove to be a challenge during such transactions, as these transactions have a severe effect on a country's economy, and most M&As involving dominant A&D firms require the approval of the country's legislature to be completed.
Key Market Trends
Consolidation will Continue at a Rapid Pace in the Aerospace & Defense Sector in the Coming Years
The A&D sector is highly capital intensive due to the rigorous R&D programs that need to be undertaken to upgrade the product portfolio and integrate new merging technologies in the products with an aim to compete with other companies offering similar or better products at a given price point. The high risks involved with R&D and supply chain render a certain uniqueness to the sector and elevate the barriers to the entry of new players. The M&As in the defense sector are primarily directed towards acquiring smaller players with niche capabilities to utilize the acquired expertise to upgrade the current product portfolio of the acquiring company. It has been observed that the likelihood of a defense merger is radically increased if it involves smaller players or those focused on tangential industries, as in the case of the United Technologies-Raytheon merger. Most defense incumbents have adopted a "one-stop-shop" model that enables them to develop manufacturing capabilities at the component level, reducing/eliminating the supplier dependence of the OEMs. While the OEMs have benefitted largely from the transparency offered by a smaller and consolidated supply chain, the associated suppliers have largely banked on increasing profit margins by developing indigenous design capabilities and entering long-term service contracts with prominent A&D firms. Besides, firms like Raytheon Technologies Corporation and Safran SA have actively focused on vertical consolidation of their capabilities and have hence acquired companies like Rockwell Collins and Zodiac Aerospace, respectively.
The aerospace and defense sector is undergoing a strategic transformation that emphasizes the consolidation of the supplier base to remove unnecessary costs and enhance the long-term viability of each successor organization. In 2019, United Technologies Corporation (UTC) and Raytheon Company (Raytheon) underwent an all-stock merger to consolidate their position in the A&D sector. The merger resulted in a balanced and diverse portfolio that can cater to both the aerospace and defense requirements, enhanced R&D platform, and facilitate strong cash flow generation. However, the upcoming defense-to-defense mergers will face a challenge in the form of government oversight because of the small number of prime defense contractors operating at a global scale.
United States Experienced Major M&A transactions between 2018 and 2020
The A&D sector in the US is mature and fragmented with several global and regional players active in the market. Since the major aerospace OEMs are based in the US, several tier suppliers are opting to enter or penetrate the US market through M&A. Also, some of the existing companies to increase their offerings are acquiring other firms based in this region. The multi-billion merger between Raytheon Company and UTC that was completed in April 2020 has been envisioned to benefit both the firms due to the potential synergies, such as a possible combination of UTC's Pratt & Whitney F-35 JSF engines with Raytheon's Patriot missile-defense products and expertise in areas such as radars, munitions, and cybersecurity. Likewise, several other acquisition deals were announced in June 2019. For instance, Boeing announced the acquisition of the EnCore Group and Parker Hannifin Corporation announced the acquisition of Lord Corporation. The M&A activities are also increasing in the Asia-Pacific region as several OEMs are opening manufacturing facilities in Asia.
Key Topics Covered:
2 RESEARCH METHODOLOGY
3 EXECUTIVE SUMMARY
4 MARKET DYNAMICS
4.1 Market Overview
4.2 Market Drivers
4.3 Market Restraints
5 MARKET SEGMENTATION (Market Size by Value - USD billion)
18.104.22.168 Major M&A Deals during 2018-2020
22.214.171.124 Major M&A Deals during 2018-2020
5.2.1 North America
5.2.4 Latin America
5.2.5 Middle-East and Africa
6 COMPETITIVE LANDSCAPE
6.1 Company Profiles
6.1.1 The Boeing Company
6.1.2 Raytheon Technologies Corporation
6.1.3 Airbus SE
6.1.4 General Electric Company
6.1.5 Safran SA
6.1.6 BAE Systems plc
6.1.7 Parker Hannifin Corporation
6.1.8 L3Harris Technologies, Inc.
6.1.9 Leonardo S.p.A.
6.1.10 Thales Group
6.1.11 Elbit Systems Ltd.
6.1.12 Rolls-Royce plc
6.1.13 Honeywell International Inc.
6.1.14 Rheinmetall AG
7 MARKET OPPORTUNITIES AND FUTURE TRENDS
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