As the aerospace industry gears up for the Farnborough Airshow, Investment banking group Lazard has outlined key sectors and trends shaping mergers and acquisitions (M&A) in aerospace and defense, underscoring significant developments and transactions in the sector.
Lazard has marked its 116th aerospace and defense M&A deal since 2013, highlighting robust activity in the sector with strategic moves like the sale of Ultra Maritime’s Signature Management & Power business to ESCO Technologies.
Lazard's expansion includes a new office in Germany and entry into Saudi Arabia, key regions identified for substantial business growth.
According to Michael Richter, Managing Director and Global Head of Aerospace and Defense at Lazard, the top trending sectors for M&A include aero Engines as the opportunities for consolidation driven by high growth and large order backlogs, aiming to capitalize on under-capitalized manufacturers and diversify customer bases across major OEMs.
Another top trending sector is the defense electronics with increasing demand fueled by digitalization across mission systems and sophisticated weapons, highlights strong growth prospects in this sector.
Integration of Artificial Intelligence and Machine Learning in pilot training and production processes, enhancing efficiency and capability in aerospace manufacturing makes AI a top trending sector as well.
Other two include Components and Subsystems - attractive business models leveraging sole-source positions in critical components and subsystems across various applications and sectors – and Next Generation Aviation – Supersonic & Blended Wing Body with emerging trends such as commercial supersonic aviation and blended wing body concepts are gaining traction, driven by environmental considerations and technological advancements.
Top Four M&A Trends:Top four M&A trends meanwhile are listed as below.
Vertical Integration Strategies: OEMs and Tier 1 suppliers are focusing on vertical integration to ensure workforce readiness, maintain quality standards, and secure robust supply chains. Commercial Aerospace Segments: Rising investor interest in businesses connected to narrowbody aircraft, next-generation engines, and high-value components amid increased commercial aerospace build-rates. Defense Sector Dynamics: Continued strong M&A activity driven by geopolitical tensions and expanding defense budgets, particularly in defense electronics and C4ISR segments. Enhanced Due Diligence: Deeper scrutiny in M&A processes to navigate competitive auction dynamics and regulatory compliance in today's market environment. 2023 M&A Review:In 2023, M&A transaction values totaled $30.3 billion in the commercial aerospace and defense sector, showing recovery momentum from previous years. Notable transactions included BAE's acquisition of Ball Aerospace and Boeing's acquisition of Spirit.
Recent headline transactions in 2024 include Boeing's purchase of Spirit and SES's acquisition of Intelsat, reflecting ongoing strategic realignments within the industry.
Lazard's diverse range of transactions in 2023 underscores its pivotal role in navigating complex deals across the aerospace and defense landscape, from technology acquisitions to strategic divestments, shaping the future of the industry.
