Annual Deal Report – Defense

The ‘Defense Annual Deal Report’ will help dealmakers to effectively and efficiently gain an in-depth understanding into deal activity in the global defense industry in 2011."

Using this report, dealmakers will effectively and efficiently gain an insight into the deal activity in the defense industry in 2011. The report provides an overview of all the partnering, alliances and M&A deals announced worldwide.

Key Highlights

• The defense industry reported 574 transactions worth US$62.6 billion in 2011.
• Deal activity fluctuated on a monthly basis and peaked in June 2011, while September 2011 recorded the lowest activity. Second half of the year recorded a decline in deal activity compared with first of the year. When considering quarterly deal activity, deal activity was the highest in Q22011 and the lowest in Q32011.
• Majority of the transactions in the defense industry were M&A transactions followed by partnership transactions.
• The C4ISR Electronics and IT sector dominated the deal activity in the year, followed by the aerospace products and parts manufacturing segment.
• The principal drivers of deal activity remained scaling-up business and geographical expansion, with a primary focus on mitigating risks associated with dependence on domestic markets, and exploring opportunities arising from emerging markets.
• Another wave of consolidation in the defense industry was seen in 2011 and this trend could continue in the short to medium term, amid government budget cuts for military spending in the US and Western Europe.
• Banking on attractive debt markets, companies in the defense industry raised US$11.1 billion from debt markets, compared with US$3.2 billion raised from equity markets.
• PE/VC investments in the industry in 2011 stood at US4.6 billion, the majority of these investments went into C4ISR Electronics and IT space.
• Many planned strategic sales of business units were reported in 2011, which may materialize in 2012. This gives a sense of promising deal activity in 2012 as well.
• M&A activity was dominated by C4ISR Electronics and IT segment with 148 transactions worth US$26.4 billion.
• Strategic partnerships recorded 142 transactions, which were dominated by the North American region and the C4ISR Electronics and IT segment.
• The C4ISR Electronics and IT segment dominated the deal activity in the year with the highest deal activity, followed by the aerospace products and parts manufacturing segment.
• The North American region accounted for the majority of the deal activity in 2011, followed by the European region. The Asia-Pacific region was the third most active in terms of overall deal activity and mainly driven by growth in emerging markets such as China and India.
• In BRIC (Brazil, Russia, India and China) countries, India dominated the deal activity with most number of deals, while Brazil was the least active country in the group.

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