Frost & Sullivan: Private Equity and Venture Capital Investments in Aerospace and Defence Slow due to Economic Uncertainty in Europe
28 Jun, 2012, 10:00 BST
- Opportunities galore for Asia-Pacific owing to lower cost-structures; India and China among preferred countries for investments
LONDON, June 28, 2012 /PRNewswire/ -- Given the current state of the global economy, investors are becoming increasingly cautious and risk averse about their portfolio investments. This translates into a restraint for the aerospace and defence (A&D) industry as it is capital intensive and investors are unwilling to commit sizeable amounts of money to an industry that has a longer gestation period compared to other industries. However, there may be potential opportunities for investors who are looking for secondary buyouts owing 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 Aerospace & Defence Industry in Europe, finds that the value of private placement transactions in the European aerospace and defence industry has decreased from $7.05 billion in 2009 to $3.77 billion in 2011. In the same time frame, the percentage of value of private placement transactions in the aerospace and defence industry compared to private placements across all industries has decreased from 2.88 per cent to 1.84 per cent in Europe.
Between 2006 and 2011, around 65 per cent of private placement transactions in the European A&D industry were in the $1 million to $100 million range suggesting that investors have predominantly stuck to lower value deals. Sectors that have attracted investments include A&D maintenance and services, military aircraft, airlines and naval defence systems among others. The first two alone account for over 50 per cent of transactions by value.
Some of the key factors that are expected to drive growth in the industry include aircraft replacement needs faced by mature markets, and growth in emerging markets.
Airbus expects the global passenger fleet to more than double from the existing 15,000 to nearly 31,500 aircrafts by 2030. This is likely to include around 27,800 new deliveries of which 10,500 will be needed for replacing old aircrafts.
"The increasing percentage of the middle class population, especially in countries such as India, China, and Russia, is expected to create demand for the purchase of over 3,500 planes (which is roughly 15 per cent of the global demand) over the next two decades," notes Frost & Sullivan Financial Analyst, Mr. Bharath M.
India and China are among the preferred countries for investments because of lower costs compared to their Western counterparts. By 2030, Asia-Pacific is expected to account for a 33 per cent share of passenger traffic, followed by Europe at 23 per cent and North America at 20 per cent.
"Due to these trends, many original equipment manufacturer (OEM) integrators such as Airbus and Boeing are shifting their production facilities to low labour cost countries in Asia-Pacific," remarks Bharath. "OEMs are also actively seeking ways to reduce manufacturing costs by outsourcing more 'design-to- build' packages rather than just 'build-to-print' to Tier 1 OEMs."
With increasing cost structures in the European and North American regions, revenue shares may shift towards emerging and lower-cost regions such as Asia-Pacific, South America and Eastern Europe as OEMs shift their supply chain networks.
If you are interested in more information on this study, please send an e-mail with your contact details to Joanna Lewandowska, Corporate Communications, at joanna.lewandowska@frost.com.
Analysis of Private Equity and Venture Capital Investment Trends in the Aerospace & Defence Industry in Europe is part of the Financial Benchmarking in the Aerospace and Defence Industry subscription, which also includes the following research services: Analysis of Private Equity and Venture Capital Investment Trends in the Aerospace & Defence Industry in North America, Industry Dashboard-snapshot of global aerospace and defence industry- a growth monitor tool and financial assessment of global aerospace and defence industry. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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Analysis of Private Equity and Venture Capital Investment Trends in the Aerospace & Defence Industry in Europe, M7ED-F1
Contact:
Joanna Lewandowska
Corporate Communications – Europe
P: +48-22-481-62-20
E: joanna.lewandowska@frost.com
SOURCE Frost & Sullivan