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4

Second Quarter 2016

The Internet of Things (IoT) creates compelling opportunities to improve

efficiencies across a wide range of industries, specifically in the

commercial aviation sector. The IoT connects physical devices to a

network that uses sensors and software to collect and analyze data in

real-time. This enormous amount of data can be mined to determine

patterns and cycles that improve the power of prediction and boost

efficiencies. Specifically, engine manufacturers, OEMs, and operators

can improve operating efficiencies, thus expand margins, by

implementing connected technologies throughout their operations and

product lines.

At the 2015 Paris Air Show, many vendors displayed cutting-edge

technologies, such as aircraft engines that have 5000 sensors, compared

to 250 sensors in a non-connected engine. These IoT engines have the

ability to generate 10 TB of data per flight. With data loads of this size,

engineers can produce artificial intelligence models that predict engine

demands and optimize flight paths to optimize fuel consumption. IoT

engines, such as Pratt & Whitney’s GTF, also have the potential to

reduce fuel consumption by 10-15%, produce less engine noise, and

lower emission levels.

Similar to the industrial and consumer IoT space, we predict

consolidation in the IoT aerospace industry as larger firms weigh the

benefits of acquiring new technologies over developing these

technologies organically.

Industry Trends

(Aerospace Component Manufacturers M&A update)

Source: S&P Capital IQ, Public filings

Buyer

Target

Notable Acquisitions and Consolidations