Weitere ähnliche Inhalte Kürzlich hochgeladen (20) IHS Analysis - 2013 Defence Sector Mergers & Acquisitions1. As DSEI 2013 approaches, IHS analyst Guy Anderson
assesses the context behind recent mergers and
acquisitions activity in the defence and security sector.
Mergers and acquisitions (M&A) activity in the defence,
security and military aerospace markets remained true to
trend during the second quarter of the year. Activity was
up on the first three months, but consistent with the last
four years and reflecting a market that has yet to achieve
a meaningful recovery following the post-2008 slump.
Activity remained characterised by relatively small in-fill
acquisitions rather than transformational deals, while
efforts by defence companies to increase exposure to
commercial markets ranging from civil aerospace and
satellite communications to recreational ammunition
drove deal volumes.
Strong consolidation activity among the lower tiers of the
defence market continued in the West during the three
months to 30 June. Company failures, meanwhile,
continued to provide opportunities.
Beyond Europe and North America, which continued to
account for the lion’s share of transactions, consolidation
continued apace, in South Africa and Russia in particular.
August 2013
IHS Aerospace, Defence & Security
Analysis: 2013 Defence Sector
Mergers & Acquisitions
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2. IHS Analysis: 2013 Defence Sector Mergers & Acquisitions
Activity during the three months was also notable for the
potentially significant deals in the naval sector that failed
to proceed. BAE Systems’ long-running efforts to expand
its US ship-repair interests through the acquisition of
Marine Hydraulics finally ended in the face of opposition
from US regulators. In Japan, talks to merge Kawasaki
Heavy Industries (KHI) and Mitsui - a transaction that
would have created a naval shipbuilding behemoth -
collapsed, costing the president of KHI his job.
IHS recorded 37 deal announcements in the defence and
security markets during the second quarter of the year:
up from 21 in the first quarter. Total activity for the first six
months (58 deals) was comparable with the first half of
2012 (59 transactions) and 2011 (61 deals).
Aggregate deal value in the second quarter of 2013 was
USD2.7 billion: a figure buoyed by the announcement of
the USD600 million purchase of aerospace component
company Permaswage by Precision Castparts in the
United States.
The average transaction value was, however, a relatively
modest USD140 million: a figure roughly in line with levels
of recent years.
Targets
Companies with exposure to the C4I domains remained in
favour during the quarter, accounting for 40% of
transactions. There was a notable emphasis on
intelligence service providers with notable deals including
Raytheon’s purchase of US-based Visual Analytics
Incorporated and the acquisition of the Datong
organisation by Seven Technologies Holdings in the UK.
Satellite communications targets, meanwhile, continued
to feature prominently. UK-based Inmarsat acquired
Australian satellite communications firm TC
Communications, while South Africa’s Denel was cleared
to absorb national satellite-maker Sunspace.
Subsystems manufacturers, for their part, accounted for
43% of deal targets during the second quarter of the
year. The emphasis was heavily on providers of
aerospace components, notably in the propulsion arena.
Examples included Precision Castpart’s USD600 million
purchase of Permaswage (a supplier of fluid fittings for
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3. IHS Analysis: 2013 Defence Sector Mergers & Acquisitions
military and commercial aerospace markets); UK
aerospace engineering firm MB Aerospace’s acquisition
of US-based aero engines component manufacturer Delta
Industries (a supplier to the US Department of Defense);
and in France the acquisition by Zodiac Aerospace of La
Jonchere: a French manufacturer of ducts and flexible
joints for aerospace and defence applications.
Buyers
Middle- and lower-tier defence contractors accounted for
more than half of transactions during the second quarter:
a sharp increase on recent quarters that reflects the
gathering pace of lower-tier consolidation in both
aerospace and defence domains.
Acquisitions by larger organisations during the three
months to 30 June included Honeywell’s purchase of
chemical, biological, radiation, and nuclear (CBRN)
protection specialist RAE Systems (valued at USD340
million); Cassidian’s addition of Arkoon Network Security
to its cyber-security portfolio (USD18 million); Raytheon’s
acquisition of Visual Analytics Incorporated; and Saab’s
purchase of technical manuals producer TIKAB. The
deals were small in scale and the absence of cross-
border activity among upper tier buyers was notable.
Consolidation through adversity
Examples of consolidation driven by financial challenges
were numerous during the second quarter of the year. In
the United States Cubic Defense acquired the assets of
simulation products specialist Advanced Interactive
Systems through a bankruptcy auction. In South Africa
troubled Sunspace, which had limped along under
business rescue legislation, was taken under the wing of
state-owned Denel.
South Africa’s Paramount, meanwhile, announced in April
that it would acquire Advanced Technologies &
Engineering (ATE). The company behind the South African
Vulture unmanned aerial vehicle platform, ATE entered a
business rescue programme for the second time in
November 2012.
Efforts by core defence companies to gain greater
exposure to recovering commercial markets continued
during the second quarter, with European technology
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4. IHS Analysis: 2013 Defence Sector Mergers & Acquisitions
group Thales and US ammunition specialist ATK
providing two examples. Thales completed the
acquisition of Egis, a French air traffic management IT
firm, in June: a deal that reflected Thales’ stated belief
that air traffic volumes will double during the next 30
years. ATK, meanwhile, acquired Caliber: the parent
company of hunting rifle manufacturer Savage Sports
Corporation.
Examples of large-scale organisations reducing exposure
to defence markets were also apparent. Rolls-Royce sold
its 50% stake in the RTM322 helicopter engine
programme to joint venture partner Turbomeca, arguing
that it needed to “concentrate on the core defence
programmes that we believe offer us the best future
potential” while deciding “where to grow and where not
to”.
The deals that got away
Two transactions with the potential to shift the naval
markets of the United States and Japan floundered
during the second quarter.
BAE Systems conceded at the close of June that its
USD69 million purchase of Virginia-based Marine
Hydraulics International had no prospect of proceeding,
given the opposition of the US Navy and the US
Department of Justice on the grounds of competition
concerns. The transaction would have been a significant
addition to the UK-headquartered group’s existing ship
repair interests.
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5. IHS Analysis: 2013 Defence Sector Mergers & Acquisitions
In Japan, meanwhile, KHI announced in mid-June that it
had terminated negotiations with Mitsui Engineering and
Shipbuilding over a planned merger that would have
created Japan’s second largest naval shipbuilder.
KHI announced that it had replaced its president, Satoshi
Hasegawa, and two senior executives over their role in
pushing for the merger. Had it proceeded, the KHI-Mitsui
merger would have created a company with combined
annual sales of about USD19 billion (KHI with USD13
billion, Mitsui USD6 billion), behind only Mitsubishi Heavy
Industries (MHI, with USD34 billion) in terms of Japan’s
biggest commercial/naval shipbuilder.
This analysis is abridged. The full profile is available within
IHS Jane’s Defence Industry & Markets Intelligence
Centre.
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6. IHS Analysis: 2013 Defence Sector Mergers & Acquisitions
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