The defence industry in Europe and the US has consolidated significantly over the past decade with mega prime contractors forming such as Finmeccanica, BAE Systems, Northrop Grumman and Lockheed Martin, often by acquiring Tier 1 sub system suppliers. Much of the consolidation in the 2000s was driven by a desire to grab an ever larger piece of an ever larger defence budget. Times are very different now.
Defence companies have limited prospects of growth in their traditional markets (and will do well to limit declines) and yet shareholder pressure remains to deliver growth in earnings. Different companies are responding in different ways but M&A activity is one of the key mechanisms being utilised with two main trends emerging. Firstly, there is increasing consolidation of sub systems and technology suppliers, away from the mega prime contractors, with the expansion and growth of strong, global Tier 1 sub system suppliers. Secondly, many companies are diversifying away from defence into what they view as related areas such as commercial aerospace and government IT. This paper explores the history, drivers and scenarios for defence industry consolidation.
08.00 - 08.30
Registration and breakfast
08.30 - 10.00
Presentation, followed by question and answer session
Paul Edwards, Managing Director, Jefferies International