Supplier Challenges
The predictions of many analysts of a 5% to 6% annual compounded growth in the Large Commercial Aircraft (LCA) sector seem optimistic in the current environment. Major manufacturers have announced production cuts or warned that these may be coming. Airlines are struggling with limited financing available to take new deliveries, coupled with falling demand for air travel and dropping oil prices, reducing the incentive to take growth / replacement aircraft. This environment increases uncertainty of future production and aftermarket revenues for Aerospace companies, which in turn drives a need to re-evaluate strategy and product offering, carefully consider investment decisions, conserve cash to ride out the down cycle, and position for the next up-cycle.
Although the current environment is uncertain, Aerospace companies must take care that short-term actions to weather the crisis do not negatively impact long-term success. With the upcoming launch of the replacement programs for the highly successful A320 and B737 families, Aerospace suppliers must position themselves now for participation in the next 20 years or risk being left out of those programs altogether.
The successful launch of the B787 has clearly demonstrated the same dynamics. Suppliers of the B767/A330/340 programs that have not been selected on the 787 or the A350 will face severe mid-to-long-term revenue losses. Aerospace suppliers - in particular Tier 2/3 Aerostructures suppliers and mechanical systems suppliers - have few available options to respond to those challenges:
- Acquire competitors and form a more efficient, financially powerful platform to meet the (aggressive) expectations of Airbus and Boeing,
- Prepare for unsatisfactory mid-term results, or
- Take advantage of the current M&A market to return equity to their shareholders before it significantly loses its value.
Seabury M&A Advisory skills, insight and network will help small or large Aerospace companies establish an M&A strategy and execute flawlessly. Alone or alongside your existing financial partners, Seabury brings a 360-degree view of the Aerospace landscape with its insight into Manufacturers, Airlines, MROs and Investors, as well as trends in the behavior and success drivers of each of these. As such, Seabury can help management and owners identify and engage targets with confidence that a deal can be done.
