Earlier this month, Avascent attended the German Private Equity and Venture Capital Association (BVK)’s annual meeting in Berlin. To accompany the meeting, Avascent consultant Lars Miethke wrote for BVK’s publication BVK-KURIER examining opportunities for European private equity investors after a record 2017 in aerospace and defense M&A. The full text of the op-ed is below:
PE Opportunities in European Aerospace & Defence
The economic potential of space, growing defense budgets in Europe, and full order books of commercial aircraft OEMs are setting the stage for another record year in aerospace & defense M&A. Despite this strong growth trend, European company valuations have been comparatively cheap relative to multiples of North American transactions. On top of that, Non-European Private Equity firms are often hesitant to invest in Europe because they dread its strict labor laws and complicated politics. A potential opportunity for European Private Equity investors.
Last year’s record M&A activity in the aerospace & defense sector was mostly driven by the US, with reported transaction volumes 4-5 times as high as in Europe. Only two European transactions made it into the list of the top ten deals for 2017 – the strategic acquisitions of Gemalto and Zodiac Aerospace in France. Nevertheless, deal flow is likely to remain high as European defense corporations are seeking to spin-off assets and acquire innovative technology leaders, and buyers shop for bargains in the UK due to Brexit uncertainty (as shown by Melrose’s proposed acquisition of GKN).
The first quarter of 2018 alone has seen many transactions with PE involvement focused on small- & mid-cap defense firms in Europe and several more deals focused on the commercial aviation & space sectors are in the making.
These developments represent a unique opportunity for German & European PE investors as the often-larger US remain cautious about investing in Europe. A strong understanding of Europe’s political and regulatory landscape is a valuable competitive differentiator in the A&D industry.
An understanding of the customer requirements, program lifecycles, government budgets, and competitive positioning of a potential target are among the key indicators of a target’s attractiveness. As the leading A&D management consulting firm, Avascent supports more than 40 M&A engagements annually, advising private equity & strategic investors globally on transactions in government-driven markets.
The original German version of the op-ed is available here.
Avascent is the leading strategy consulting and analytics firm serving clients operating in government-driven markets. Working with corporate leaders and financial investors, Avascent delivers sophisticated, fact-based solutions in the areas of strategic growth, value capture, and mergers and acquisitions support. With deep sector expertise, analytically rigorous consulting methodologies, and a uniquely flexible service model, Avascent provides clients with the insights and advice they need to succeed in dynamic customer environments.