The first half of 2016 saw a slight softening in M&A activity overall, and the aerospace & defense sector was no exception. Component Manufacturing activity slowed as expected, while Defense IT & Technology has rebounded on the back of increased government spending and the sizable, transformative deals of 2015. Private equity’s heavy involvement in the sector is likely to ensure an underlying level of M&A transaction activity going forward, and we expect to see something of a reversal in emphasis by acquirers, back towards defense after a period where commercial aerospace has taken the lead.
After two consecutive years of record North American deal counts, Aerospace & Defense M&A activity inevitably softened in 1H 2016. Deal volume fell ~13% through the end of June 2016 compared with both 1H 2015 and 2H 2015. Across all industries, North American M&A activity as a whole showed ~8% decline compared with both 1H 2015 and 2H 2015. Transaction values, meanwhile, were down ~10% year-over-year within A&D while unchanged on average across all sectors.