5 Considerations for A&D Principals Considering M&A

A&D M&A is a massive undertaking, but there are plenty of opportunities for profit and increased synergies. Whether you’re planning retirement, hoping to grow your business, or planning to jump to your next venture, planning is key to successful mergers and acquisitions in this competitive space. Owners and directors in aerospace and defense firms face a unique market. Here are five factors you’ll need to consider. 

Increased Industry Consolidation 

The industry is rapidly consolidating, with large contracts going to the largest players. This trend shows no sign of changing, leaving smaller firms to make a decision: adapt to the change now, or potentially get eaten by a competitor later. Understanding the consolidation trend can help you remain ahead of it, and identify the specific value your firm might provide to a larger player. The biggest A&D firms are increasingly seeking out add-on platforms with valuable technology, especially in the AI space. 

New and Emerging Technologies 

Supply chain issues continue to assault A&D. Companies that can innovate and work around these issues stand to profit immensely. New technologies, especially those that reduce the pressure of supply chain disruptions, are extremely valuable. Smaller businesses that offer such technologies should consider how they may add significant value to larger players. 

Rising Interest Rates 

Rising inflation and rising interest rates have created the perfect storm: Capital is harder and more expensive to get, and worth less. This trend is likely to persist for the coming months, and possibly longer. This means that, if you know you want to sell, the safest and most profitable time to do so is now. The future is highly uncertain, with potentially less cash available. So A&D firms must be prepared to act quickly and get expert advice. 

Increased Deal Scrutiny 

A&D mergers can affect national security in a way that many other industries do not. For this reason, they are subject to additional scrutiny. The Department of Defense recently announced its concerns about a trend toward more consolidation in the industry, and its intention to apply even more scrutiny to A&D deals, especially those that might shift the power balance in the wider industry. This may slow deals, require significant legal support, and demand more documentation. Deal makers must be prepared, and adjust their deal timelines accordingly. 

The Need for Additional Support 

A DIY approach to A&D M&A has never been a wise strategy. In today’s climate, it’s even less so. The pandemic has shown how quickly things can change, and the supply chain crisis has illustrated how quickly outside forces can shake an entire industry. Expert insight is critical for managing regulatory complexities while understanding trends in the industry and the wider economy. The right A&D M&A firm can help market your business, identify key value drivers, recruit the right buyer, and negotiate the deal, so you can continue operating your business. They can also offer significant support for regulatory, legal, and financial concerns, lending more certainty in a challenging but promising economic climate.