The aerospace and defense industry is in a boom cycle. Profits are at historic highs. Stock prices are rising. Growth rates are projected at 2 percent to 3 percent per year. And companies’ values are increasing as the sector continues to benefit from strong balance sheets and cash flows. This trend should continue over the next few years, and acquisitions will continue to be the key component driving the industry’s growth.
Sellers have a strong incentive to capitalize on their companies’ relatively high valuations. Buyers have been scouring the market to find attractive investment opportunities. Prime contractors like Lockheed Martin and SAIC have been on an acquisition binge in recent years to consolidate their businesses and reinvest earnings. They have been joined by private equity players — such as the Carlyle Group and Arlington Capital Partners — that are similarly flush with cash and eager to invest in appreciating assets.
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