AEROSPACE & DEFENSE MARKET MONITOR: WINTER 2021

HomeAEROSPACE & DEFENSE MARKET MONITOR: WINTER 2021

    AEROSPACE & DEFENSE MARKET INSIGHTS

     

    KEY INSIGHTS

    • Industry Headwinds Force Supply Chain to Face Declining Aircraft Orders and Build Rates
    • Well Positioned Commercial Suppliers Poised to Capitalize on Expected Recovery
    • Diversification at the Forefront of M&A Strategy
    • Active M&A Market for Defense and Space Technologies

     

    The commercial aircraft industry has faced significant challenges over the past two years resulting from the grounding of the 737MAX and the reduction in air traffic demand caused by the COVID-19 pandemic. In response, suppliers are looking to diversify their customer and aircraft platform exposure, as well as expand their capabilities to increase their value proposition to OEMs.

    Air travel is expected to recover over the next two to three years providing the opportunity for suppliers with long-term agreements to benefit from the anticipated ramp in build rates. Healthy companies will be well positioned to pursue acquisitions to gain new customers, LTAs, and expand their service offering.

    Diversification will become increasingly important for aerospace suppliers. The M&A market is expected to see acquisitions by traditionally commercial focused aerospace suppliers of companies with greater defense exposure as well as companies operating in alternative supply chains including the medical, industrial, life sciences, and semiconductor industries, among others, as they ultimately look outside of A&D altogether.

    Defense and space technology has proven to be an attractive segment for M&A for both strategic and financial investors through 2020 and so far in early 2021. Investors have been pursuing acquisitions to gain access to proprietary technologies, expand product portfolios, and further diversify end-market exposure.