Aerospace & Defense Forum Aerospace & Defense Forum M&A - - PDF document

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Aerospace & Defense Forum M&A Panel Aerospace & Defense Forum M&A Panel

Michael Cohen Global Capital Markets Inc

M&A Panel M&A Panel

Global Capital Markets, Inc.

310‐829‐9301

March 18, 2011 March 18, 2011

A&D Industry Macro Trends and Drivers

Commercial

• Supply Chain Rationalization
• Globalization

U.S. Aerospace Products and Parts Industry Structure

• 1300 companies $170 Billion revs
• 20 largest 90% of industry revs
• Need for quieter, more fuel efficient, and lower operating costs
• Events: 9‐11
• New capabilities needed for stealth, unmanned vehicles, intelligence gathering,

threat detection, delivery systems, etc.

Commercial Defense Space

• Events: China satellite shoot down (January 11 2007)

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The A&D Industry is Large, Mature, Slow Growth From a Revenues Perspective, But, it is Very Dynamic in Terms of Technology and Industry Structure

• Events: China satellite shoot down (January 11, 2007)
• Now into 10 year replacement cycle
• Materials change to composites

Technologies

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Aerospace Materials Change

Michael Cohen 310-829-9301 Page 3 A&D Forum Panel - March 18, 2011 [1] Michael Cohen Proprietary Information. SDD = System Development and Demonstration

The Aero Industry is Undergoing a Fundamental Materials Change

Supply Chain Rationalization and Globalization

Prime Contractors are focusing on aircraft design, integration, and marketing At Boeing, 70‐80% of the content for a given airplane is procured g, g p p from outside sources Supply chains are being reduced and streamlined Prime Contractors have greatly downsized in‐house fabrication Work is being sourced globally through strategic and risk sharing partners

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Prime Contractors are migrating to suppliers that can produce higher level value‐added sub‐assemblies There is a very limited base of well qualified suppliers for composite sub‐assemblies OEM s Are Driving a Rationalization of the Supplier Base

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Metal parts suppliers are not capable in composites Suppliers must develop, or acquire, composite parts capabilities

Supplier Impacts

“Critical Mass” is now over $40M revenues and is driving consolidation among Tier 3 parts suppliers Quality is still a prerequisite ‐‐ value, speed, responsiveness, agility, and financial strength have become very important Suppliers need to be more sophisticated to address engineering issues and manage scheduling and production processes

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Greater strategic alignment and electronic linkages for contracts, schedules, delivery releases, plans, specs, etc. are occurring Sole source and risk sharing partnerships are now more prevalent A&D Suppliers are Adapting and Consolidating

California Comments

Government

JPL NASA Ames NASA Ames Vandenberg C‐17 – winding down New Air Tanker

Commercial

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Space

Scaled Composites ‐ Virgin Galactic

• SpaceX

Sea Launch