Capstone’s Aerospace, Defense, Government & Security Group Reports: Sector Fundamentals Strengthen While M&A Activity Declines

BOSTON, May 29, 2024 /PRNewswire/ — Capstone Partners, a leading middle market investment banking firm, released its Aerospace, Defense, Government, & Security (ADGS) Annual Report, which features insights into the current environment as well as a review of last year including merger and acquisition (M&A) activity. 

U.S. Aerospace & Defense (A&D) sector earnings and shipments improved in 2023, surpassing pre-pandemic peaks while M&A activity fell, mirroring the broader market with knock-on effects of higher interest rates. Strong sector fundamentals and a stabilizing financing environment point to future M&A activity being more likely up than down.

U.S. A&D sector shipments returned to 2018 peaks, rising 17% year-over-year (YOY) in 2023. A&D sector public company EBITDA earnings increased 10% YOY in 2023 (after adjusting for one-off charges at defense primes) outperforming flat S&P 500 earnings.

The number of A&D sector M&A transactions fell 12% YOY in 2023 and were 24% below pre-pandemic 2019 levels. Similar trends were seen across most industries in North America. The decline in transaction activity was among private equity buyers (who were integral to the sector) and highlights the impact of interest rate increases. Valuation metrics remained relatively stable as size and sector continue to be significant drivers of M&A transaction multiples. Founders comprised the majority of sellers, driven by economic and personal factors. 

The report, available for download below, provides in-depth analysis and commentary on the overall health and outlook of the ADGS industry and discusses topics including:

How demand for commercial air travel and aircraft returned, while production constrained supply.Defense spending being capped at 1% by Fiscal Responsibility Act.Government Information Technology (IT) Services activity has continued but has been increasingly selective.Security Solutions & Cybersecurity strong fundamentals and outlook.Training & Simulation services have offered safety amid chaos.Reasons for cautious optimism in M&A activity.

To access to full report, click here.

To learn more about Capstone’s Aerospace, Defense, Government & Security Group or to discuss the content of this report, please do not hesitate to get in touch.

ABOUT CAPSTONE PARTNERS

For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company’s lifecycle.  Capstone’s services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services.  Headquartered in Boston, the firm has 175+ professionals in multiple offices across the U.S. With 12 dedicated industry groups, Capstone delivers sector-specific expertise through large, cross-functional teams.  Capstone is a subsidiary of Huntington Bancshares Incorporated (NASDAQ:HBAN).  For more information, visit www.capstonepartners.com.

For More Information Contact:
Ian Cookson
Managing Director, Aerospace, Defense, Government & Security Group
617-470-9330
[email protected]

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SOURCE Capstone Partners