Mergers and Acquisitions (M&A) in Aerospace, Defense, and Security 2020 - Thematic Research

In this report, we look at merger and acquisition (M&A) activity in the aerospace, defense, and security (ADS) sector over the year. We also highlight potential future bid targets in the sector. Current concerns are dominated by the impact of the COVID-19 pandemic on the sector. Financial stresses for companies have increased this year, with revenues slashed and immediate cashflow concerns taking priority over pre-COVID-19 strategies. That creates opportunities for M&A as companies fail or look to divest units in order to survive. Recessions act as catalysts for change. The scale of the economic shock and its impact on demand will have long-lasting consequences for the sector.

The long-term direction for the industry is impacted significantly. With the landscape having changed in many segments. Thus, reliable and efficient earners have been given a COVID shot, while there are signs that some companies are reining back investment in activities outside of their core business. While OEMs can be expected to continue to make strategic investments in vertical integration as an efficiency-seeking strategy whilst divesting non-core assets to mitigate risk, suppliers will look for investments as well as diversification in their clients to strengthen value chains. The coming years will see changes in regulatory patterns, form protection against foreign investment, to managing the extent to which supply chains consolidate.

Scope

• As the data shows, in the 12 months to December 2020 the value of acquisitions in the ADS sector was $18.6bn, with mergers valued at $8.7bn. While that acquisition sum is down on 2019's value of $101.016bn, the volume of transactions tracked by the publisher was down on 2019.
• The largest completed M&A deal announced in 2020 was the Lockheed Martin acquisition of Aerojet Rocketdyne Holdings for $4.4bn, subject to closing in 2021.

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