Strong underlying market dynamics, cash rich strategic buyers and increased interest from financial sponsors have fuelled acquisition activity and raised valuations in the commercial aerospace sector over the past 18 months. Valuations in the defence sector are also recovering after a sharp decline caused by a reduction in overall government spending and a lack of visibility on defence budgets. Consolidation is likely to be spurred further by greater clarity over budgets enabling corporates to continue to reposition their businesses towards high growth areas. For investors in the sector, it is worth considering how long the elevated deal volumes can continue and whether valuations have already peaked. For those looking to exit, understanding strategic bidder motivations is critical to achieving a premium valuation.
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