We’ve seen some big tie-ups in aerospace recently, including United Technologies’ acquisition of Rockwell Collins, Airbus’ acquisition of a stake in Bombardier’s CSeries, and Boeing taking control of Embraer’s commercial jet business. We asked Lazard’s Michael J Richter what it all means.
“I don’t know if we’re for a big [M&A] boom [in aerospace],” Richter said. “Although I would say that it will be a continuation of a very strong trend in M & A in the aerospace and defence sector. I see no reason why it wouldn’t continue, but we’ll have to see.”
He added: “We’re on pace for a record year. Last year was a very strong year as well, and we’re probably going to match or exceed that this year, I imagine.”
What’s driving M&A activity in aerospace?
On the trends driving these deals, Richter said: “Number one would be financial sponsors. The financial community has billions of dollars of capital on the sidelines that are looking for a home.
“I’d say that interest rates, despite the fact that they’ve come up a bit, are still relatively low from a historical perspective, and lending terms have been relatively loose. So, there’s a substantial amount of capital available, and aerospace has been a good place to put capital because of the strength of the underlying market, the visibility that companies enjoy in the aerospace sector, and – versus almost any other sector within the capital goods’ food chain – aerospace is one of the most interesting. So, we really are seeing very strong investment from the financial community.”
He added: “As far as strategics, you have interest from US and international suppliers looking for both transformational deals as well as ‘tuck-in’ acquisitions, and as a result we’re seeing very strong volume, really on all fronts.”
Is all this M&A activity good news on the whole for the sector.
“I think [deals] are not all good,” Richter said. “Sometimes deals don’t go quite as well as they had imagined. I think companies have sometimes too rosy projections that they set out, but as long as expectations are in line with reality, and as long as the prices that are paid are reasonable, then generally speaking the results have been very good in terms of really jump starting growth – organic growth is great, but M&A can really turbo-charge the growth that companies are experiencing in their markets, and that’s one of the key factors of success. “