Sector: Aerospace & Defence

In terms of value, M&A activity dipped to its lowest level in a decade in aerospace and defence last year.

According to a PricewaterhouseCoopers report, compared with 2008, overall deal value waned by 54 per cent to $10 billion (£6.5 billion) in a testing 2009, with appetite for transactions affected by worries about costs, delays, fewer military orders, lower passenger numbers and reduced freight movements.

Tellingly, the 2009 figure was dwarfed by the $41.6 billion in total deals, 76 per cent higher than last year’s level, which the sector experienced in a record 2007. However, an encouraging sign is that the number of deals completed in 2009 was at ‘near record levels’, meaning the transactions were skewed towards the smaller end.

Striking a note of optimism, PricewaterhouseCoopers says that firms will have more financial firepower and flexibility to ponder larger acquisitive targets in 2010 and beyond, so long as stock markets rise and borrowing money becomes easier and cheaper.

Having said that, ‘small and strategic is likely to remain the name of the game in the short term’, according to Neil Hampson, PricewaterhouseCoopers’ global aerospace and defence ‘leader’, though ‘major restructuring forces are likely to be felt increasingly strongly in the long term, with consequent implications for deal strategies and values’.

Last year’s two biggest deals were Boeing’s $1 billion takeover of a factory owned by US company Vought Aircraft Industries (in order to build the 787 Dreamliner), beaten into top spot by General Atlantic’s $1.65 billion takeover of defence consultant TASC. These takeovers paled in comparison to the largest deals of 2008 – worth $5.6 billion and $2.2 billion.