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Future of A erospace industry Role of M&A in it’s forthcoming growth Global Trends

Future of A erospace industry Role of M&A in it’s forthcoming growth Global Trends. Adam Czechanowski Senior Manager, Audit Jakub Podleśny Manager, Tax. Rzeszów, 26 June 2012. Deloitte’s Survey. Mergers and Acquisitions in A&D industry Deloitte’s Survey.

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Future of A erospace industry Role of M&A in it’s forthcoming growth Global Trends

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  1. Future of AerospaceindustryRole of M&A in it’sforthcominggrowthGlobal Trends • Adam Czechanowski • Senior Manager, Audit • Jakub PodleśnyManager, Tax Rzeszów, 26 June 2012

  2. Deloitte’sSurvey Footer

  3. Mergers and Acquisitions in A&D industryDeloitte’sSurvey • Researchsample: 89 public companies from allover the world • Survey Time: April 2011 • Scope of the study: M&A transactions from 31/12/2000 to 31/12/2010 – 10 years • In totalstudyincludes 70 North Americancompanies (79%), 16 Europeancompanies(18%) and 3 companiesrepresenting therest of the world (3%) • Sectors: Services, OEM, Tier 1&2 Suppliers • 89 analyzedcompaniesmade 1,995 acquisitions for a combinedvalue of $336 billion

  4. Historical and macroeconomicfactors

  5. Mergers and Acqusitions in A&D industryHistorical and macroeconomicfactors • The A&D industryhastraditionallyseendramaticincreases in M&A activityfollowingperiods of decline (such as 2007-2008). • As a response to the generaleconomicuncertainty, many A&D companieshavebeenstockpilingcash. Currenttotalcashbalances of the US’ A&D companiesexceedanestimated $70 billion. • Valuations of A&D firmsappear to be athistoriclows.

  6. Subsectors - characteristics

  7. Mergers and Acqusitions in A&D industrySubsectorscharacteristics (1): Services and OEM • Out-performersinvested 40% of theirinvestments in services companies, roughlyfourtimes as much as the segment’sunder-performers. • OEM areamong the onlyindustryentitieswhoseleadingprospects in M&A lieoutsidetheir segment. • Many OEMshavemadeexpansionintoaftermarket, IT, and mission system-related services a strategicimperative, and acqusitionscanhelp to accelerateOEM’sentryintothosespaces. • Services companiescanenhacetheir market position by acquiringothercompanies from the same segment.

  8. Mergers and Acqusitions in A&D industrySubsectorscharacteristics (2): Tier 1&2 Suppliers • The activities of OEMs in the 1980s and 1990s demonstratedhowconsolidation in the A&D industrycouldlead to scaleeconomies and improvednegotiatingpositions with suppliers and channel partners • As theircustomers’ negotiatingpowerhasimproved, perceptiveTier 1 suppliershavebegunimitatingthem and consolidating as well. • Tier 2 suppliershavebegunresponding in kind. The consolidation trend continues down the valuechain.

  9. Summary

  10. Mergers and Acqusitions in A&D industrySummary • The era of mega-mergers of largedefencecontractorsisbehindus. • Targetingcompanieswhose business modelsenhance the company’s market power. • ConsolidationwithinTier 1 and 2 suppliers, and services companies– anincreasinglyattractive target for OEMs. • Services companiespredominantlyacquireother services companies. • OEMs, as a segment, are the most acquisitive segment, comprisingover 50 % of M&A activity. • Both OEMs and Tier 1 suppliersareusing M&A to expandtheirposition in the valuechain, movingintobothupstream and downstreamsegments. • Tier 2 supplierspredominantlybuyotherTier 1 and Tier 2 suppliers.

  11. A&D industryforthcominggrowthDeloitte – valueadded. We arerighthere. • Globaly Deloitte hasextensiveindustryexperience with aircraftmanufacturers, suppliers, operator and services companies • We havehelpedourclientsexecuteeffectivelyacross the full M&A life cycle: strategy development, target screening, duediligence (includingaccounting and tax), taxstructuring and valuation as well as integrationplanning. • OurR&D and GovernmentIncentivesTeam can assist with the whole process of filing a R&D claimfrom scoping through document preparation and submission. • OurAuditDepartmentemployesprofessionals with anexperienceworking with major A&D companies, such as AVIO. • We are in Rzeszów since 2011. Ourregionalofficeisheaded by Grzegorz Koszel, Senior Manager in Deloitte Auditand Jakub Podleśny, Manager in Deloitte TaxAdvisory.

  12. DeloitteContactDetails Rzeszów Office Tel: +48 17 230 47 00 Fax: +48 17 230 47 01 ul. Rejtana 2035-310 Rzeszów Adam Czechanowski Senior Manager, Audit Krakow OfficePhone: +48 664 19 98 04e-mail: aczechanowski@deloitteCE.com Jakub Podleśny Manager, TaxAdvisoryPhone: +48 662 213 682e-mail: jpodlesny@deloitteCE.com www.deloitte.com/pl

  13. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/pl/aboutfor a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

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