Economic Uncertainty Hinders the Investment Environment in the Aerospace and Defense Industry, Finds Frost & Sullivan
High upfront investments make the industry less suited for illiquid investments, such as those from private equity and venture capitalists
MOUNTAIN VIEW, Calif., Oct. 25, 2012 /PRNewswire/ -- The volatility of the current global economy is making investors increasingly cautious and risk averse, especially in the capital-intensive aerospace and defense (A&D) industry. Investors are unwilling to commit sizeable amounts of money to an industry that has a longer gestation period than others; however, the A&D industry offers considerable opportunities to investors looking for secondary buyouts due to lower valuation multiples.
New analysis from Frost & Sullivan (http://www.financialservices.frost.com), Analysis of Private Equity and Venture Capital Investment Trends in the North American Aerospace and Defense Industry, reveals that the value of private placements dropped significantly from $4.09 billion in 2010 to $1.07 billion in 2011 in the North American aerospace and defense industry. This has happened despite a minor increase in the number of transactions from 80 in 2010 to 85 in 2011. These trends indicate that investors are slowly moving from low-volume, high-value deals to high-volume, low-value deals.
If you are interested in more information on this study, please send an e-mail to Jeannette Garcia, Corporate Communications, at email@example.com, with your full name, company name, job title, telephone number, company e-mail address, company website, city, state and country.
Apart from the global economic downturn, the current Eurozone crisis has also affected several European economies. Governments generally tend to cut their defense budgets when the economy slows down. In North America, the value of private placement transactions in the A&D industry has decreased from 2.4 percent in 2010 to 0.6 percent in 2011, in regards to a percentage of value of private placements across all sectors.
Nevertheless, in the aerospace sector, the increasing percentage of middle-class population, especially in India, China and Russia, is expected to result in the purchase of more than 3,500 planes over the next two decades. This is roughly 15 percent of the global demand.
"India and China are currently the preferred investment destinations because of lower costs compared to their Western counterparts," said Frost & Sullivan Financial Analyst Bharath M. "By 2030, the Asia Pacific is expected to have around a 33 percent share of the passenger traffic, followed by Europe at 23 percent and North America at 20 percent."
Maintaining healthy relationships with limited partners, diligent use of dry-powder funds, and a proactive approach toward merger and acquisition or secondary buyout opportunities are vital for investors in the A&D industry.
"Investors could also carefully evaluate prospects in emerging economies such as Brazil, India, China and Russia to compensate for the thinning business in the developed markets," noted Bharath.
Analysis of Private Equity and Venture Capital Investment Trends in the North American Aerospace and Defense Industry is part of the Financial Benchmarking in the Aerospace and Defense Industry subscription, which also includes research services in the following markets: Financial assessment of global aerospace and defense industry, mergers and acquisition trends in the global aerospace and defense industry, Funding patterns in the global aerospace and defense industry. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
Frost & Sullivan's Business and Financial Services group serves clients around the world in all aspects of financial analysis, market research and monitoring, due diligence, idea generation, opportunity analysis, investment valuation, and other proprietary research.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.
Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.
- The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation.
- The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.
For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?
Analysis of Private Equity and Venture Capital Investment Trends in the North American Aerospace and Defense Industry
Corporate Communications – North America
SOURCE Frost & Sullivan
More by this Source
Browse our custom packages or build your own to meet your unique communications needs.
Learn about PR Newswire services
Request more information about PR Newswire products and services or call us at (888) 776-0942.