GCG’s Q4 2019 Aerospace & Defense Industry Update provides an overview of the latest trends in the sector, including recent equity market performance, valuation multiples and transaction activity.
Key findings include the following:
- In Q4 2019, the Aerospace & Defense (“A&D”) index underperformed the broader U.S. equity market for the first time in 2019. However, in the three-year period ending December 31, 2019, the S&P 500 returned 42.3%, falling short of the overall gains by most segments of the A&D industry. Order backlog and deliveries in the commercial aerospace sector experienced a decline in 2019 amid ongoing issues related to specific aircraft, however the long-term demand outlook for commercial aircraft continues to be robust. In December, the FY20 U.S. defense budget was established at $738B, representing an increase of approximately 3% over 2019.
- There were 67 transactions within the A&D industry involving United States based targets or acquirers. 87% of Q4 transactions involved strategic acquirers with the remaining 13% representing platform acquisitions by financial buyers. Acquisitions by strategic buyers who are already backed by private equity firms blur the line between the two categories and represent a meaningful driver to industry activity.
- Categorically, approximately 58% of transactions took place in the Aerospace industry, vs. 7.5% in the Defense IT/Services, 30% in Defense, and 4.5% in Space. Representative transactions are further highlighted in the report.
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