Aerospace & Defense (A&D) Industry

Q4 2023: Mergers and Acquisitions Trend Report

Industry Overview

• The A&D Industry’s largest US transaction in 2023 was the joint acquisition of Maxar Technologies by Advent International and minority stakeholder BCI for $6.4 Billion.
• The A&D sector has observed a strong recovery since the conclusion of the COVID-19 pandemic, but the industry remains volatile and subject to supply chain disruption. These concerns are exacerbated by ongoing global conflicts and material shortages in the United States and abroad.
• The Russia-Ukraine conflict as well as overarching global concerns will allow the domestic defense sector to earn revenue from foreign defense contractors going in H2 2023.
• Key players in the A&D sector are General Dynamics Corporation, Honeywell International, Lockheed Martin Corporation, The Boeing Company, and Raytheon Technologies Corporation.

Key Industry Trends

• As the post-COVID aerospace industry surges in emerging markets, exports from the United States are drastically increasing. As high skill labor is needed to create new airplanes, the later stages of the aircraft production chain are often outsourced to the United States, solidifying its
  position as one of the top airplane suppliers world-wide.
• Domestic and global defense budgets are likely to increase into 2024 as conflicts with Russia and Ukraine persist and the United States arms its immediate NATO allies.

Recent M&A Transactions

Historical Performance

• Domestic demand for commercial flights has historicallyshifted elastically in alignment with per capita income.
• Defense funding has been volatile in the past six years dueto elections and significant geopolitical developments.
• Despite volatility during COVID and the followingyear, A&D revenues have increased year-over-year since2021.
• The A&D industry had a CAGR of -2%the past six years, but revenue has increased by 44% from 2020

Future Industry Growth

• The Aerospace & Defense market is expected to continue its upward trend in the near future. Tailwinds for this growth include a forecasted rise in demand for commercial trips, more globally available/accessible air travel, and efforts towards increased electric air propulsion.
• Supply chain recovery and growth is likely to contribute to lower manufacturing costs and greater economies of scale as the supply of aircraft, imported parts, components, is expected to solidify worldwide as new jobs are produced.
• Industry revenue is expected to grow at a CAGR of ~2.6%to an estimated $251.7 billion over the next five years.