Aerospace M&A Bolstered by Industry Upswing
Mergers and acquisitions activity in the commercial aerospace industry has progressively rebounded from lows experienced in 2009. The cyclical sector was stung by the economic downturn, and deal volume was more than halved, from 107 announced transactions in 2008, to just 52 in 2009. As stability returned to global markets, the industry emerged from the doldrums with noticeable tailwinds.
The $18 billion (including net debt) acquisition of industry consolidator Goodrich by United Technologies at a ~50% share price premium, expected to close by June 30, characterizes the resurgence. This transformational deal has been followed by a number of transactions in 2012, as strategic interest is strong for companies with valuable technology and highly engineered components.
Further, financial sponsors who rode out the downturn are being rewarded with successful exits, including TransDigm’s $750 million acquisition of AmSafe (Berkshire Partners and Greenbriar Equity) and RTI’s acquisition of Remmele Engineering (Goldner Hawn Johnson & Morrison).
Industry dynamics give reason for continued optimism through the foreseeable future. Over each of the past 21 months, passenger traffic and capacity grew on a year-over-year basis. OEMs enjoy positive market reception for new platforms and rebuilding inventories are driving aftermarket supplier strength. Public markets reflect aerospace sector momentum, with available financing and share prices ticking upward. As the drivers of a further upswing expand, macroeconomic factors appear to be the only governor on an increasingly active aerospace M&A market.