5
As of 09/30/2016
5
Q3
2016
Notable Acquisitions and Consolidations
Industry Trends (Aerospace)
In the last three months, there have been eleven completed transactions in
the Aircraft Components sector, ranging from manufacturers of specialized
machined parts for gas turbines to producers of precision injection molded
parts. These acquisitions were fueled by the strong demand from OEM’s
for specialized and proprietary manufactured components needed to
complete the record number of orders for new aircraft. Additionally, the
recent slump in raw materials prices has helped to increase the margins of
these firms making them highly sought after acquisitions for companies
looking to vertically integrate in the market. However, as demand for new
commercial aircraft from lessors begins to slow, the market for component
manufacturers could be facing significant headwinds.
Over the last year, new large commercial aircraft supply appears to be
outpacing demand as evidenced by a meaningful number of new and used
leased aircraft available in the marketplace. In recent years, lessors have
typically purchased an average of 500 aircraft annually. Through the third
quarter of 2016, orders from lessors have decreased to less than 100
aircraft. In addition to declining orders, lessors are retiring fewer aircraft as
airlines are beginning to demand older aircraft given that fuel economy is
less of a concern in the current market environment.
Excess supply of lessor aircraft combined with declining new aircraft orders
could begin to place downward pricing pressure on OEMs which in turn
could result in a squeeze on the rest of the supply chain. If this scenario
plays out the business models of aircraft component manufacturers could
seem less attractive to potential buyers.
Buyer
Target
Coatings Business
Newport News
Portfolio Company of Blackstone
Poland
Source: Public Filings, Industry Newswires