Aerospace & Defense (A&D) Industry

Q3 2022: Mergers and Acquisitions Trend Report

Industry Overview

• The A&D Industry’s largest US transaction in Q3 2022 was Parker Hannifin’s acquisition of Meggitt for $7,393.24 million.
• The A&D sector has observed a strong recovery since the COVID-19 pandemic, but the industry is still overcoming supply chain disruptions and price volatility. These challenges have been exacerbated by Russia invasion of Ukraine and a shortage of talent in the industry.
• The defense segment has remained stable throughout 2022 and is expected to outperform the commercial aerospace segment as defense budgets have increased.
• Key players in A&D sector are General Dynamics Corporation, Honeywell International, Lockheed Martin Corporation, The Boeing Company, Raytheon Technologies Corporation.

Key Industry Trends

• As increased jet fuel prices have the potential to affect traffic and increase market volatility, aerospace manufacturing companies are likely to invest in engine and
  aircraft design to make them more fuel-efficient, reduce operating costs, and investigate lower- and zero-emissions commercial aircraft for the future.
• Rise in new aircraft and military orders imply growth continuing in 2023 as the Aerospace & Defense industry gains momentum after COVID-19 vaccine rollout and passenger traffic returns to pre-pandemic levels.

Recent M&A Transactions

Historical Performance

• Domestic demand has remained volatile over the past five years due to falling defense spending and a slowdown in commercial aircraft production and exports.
• Low demand for air travel resulted in revenue decrease at an annualized rate of 3.6% to $211.4 billion over the five years to 2022. Experts anticipate a 16.4% rise in 2022 alone as industry demand continues to recover from the coronavirus pandemic.

Future Industry Growth

• The Aerospace & Defense market is expected to recover as companies plan to replace older models with more fuelefficient models and defense budgets rise in response to the Russian invasion of Ukraine.
• Economic recovery and consumer income growth will increase the numbers of domestic and international trips by residents over the five years to 2027.
• The supply of aircraft, imported parts, components, is expected to increase at an annualized 1.3% to $57 billion.
• Over the next five years, industry revenue is forecasted to rise from $211.4 billion in 2022 to $238.8 billion in 2027.