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Aerospace & Defense
Global Overview
2017
Aerospace & Defense Market Insights
General Overview | 2017
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Aerospace & Defense Market Insights
Country Overview | 2017
Belgium Aerospace & Defense Overview
The Belgian aerospace market is primarily comprised of small and medium enterprises (SMEs) producing assemblies, sub-assemblies and components for
various aircraft, and offering various maintenance, repair and overhaul (MRO) services. These SMEs focus on advanced, small-batch production capabilities in
both metallurgy and composite materials. The overall aerospace and defense (A&D) industry has total revenues of US$3.7 billion, representing a compound
annual growth rate (CAGR) of 4.1% since 2010. The A&D industry is expected to grow at a 0.8% CAGR in the near-future, with the industry expected to reach a
value of US$3.9 billion by the end of 2019. Recently, civil aerospace has been the Belgian A&D industry’s most lucrative segment, representing over 70% of the
industry's total market.
Belgium’s defense industry is fully privatized and centered on manufacturing components, subassemblies and small arms rather than full weapon systems and
platforms. As a small nation, Belgium cannot maintain a large defense industry based on internal requirements, and instead, relies on external components
and subcontractor work on major defense programs. Belgium’s military, similarly to other countries in Europe, is aging. The average soldier is 43 years old and
the number of soldiers has declined from 40,000 in 2006 to 32,000 in 2016. Due to this decline, Belgium is streamlining its forces to no longer have a separate
army, navy and air force, but rather a unified defense entity with a land, sea and air component served by a joint medical component. Additionally, Belgium
has developed the Belgian Soldier Transformation (BEST) program integrating the latest technologies, including smart textiles, enhanced integrated and
scalable communication, personal optics and global positioning.
Belgian Deal Spotlight: Sonaca to Acquire LMI Aerospace Belgian Region Spotlight: Wallonia
Transaction Highlights Deal Financials • The aerospace industry in Wallonia turns over
almost US$1.9 billion annually and employs
• On February 16, 2017, LMI Aerospace Inc. Transaction Value: US$432M 5,800 people, including 1,400 in the space
(Nasdaq:LMIA) agreed to be acquired by Sonaca Equity Value: US$192M research sector
for US$14/share (representing a 52% premium TEV/Sales: 1.2x • The A&D industry was initially funded with
over LMI’s closing share price on February 16,
2017)
• Sonaca Group is a Belgian company known for its
TEV/EBITDA: 12.5x
Announced Date: 02/16/17 Wallonia state investment. Today, several of Wallonia’s
large companies are foreign-controlled
• Companies with key investments in the region
capability to produce advanced aerostructures include SABCA (plant in Charleroi), Safran
• LMI Aerospace is a leading supplier of structural (subsidiary Techspace Aero), Thales (two
assemblies, kits and components businesses in the region) and Sonaca (state-
• The transaction closed on June 27, 2017 owned, based in Charleroi)
Select Belgian A&D Transactions Select Company Profiles
($ in US millions) TEV / TEV / ($ in US millions)
Date Target Acquirer TEV Sales EBITDA Company Commentary/Investments
07/16/17 ADB Safegate The Carlyle Group – – –
• Manufactures high lift devices, complex mechanical assemblies,
and functional components for the aerospace industry
11/07/16 Advanced Circuit Boards Edmond de Rothschild, – – – • On February 22, 2017, ASCO signed a long-term contract with
Cabestan Capital Boeing for the production of hard metal and aluminum
10/10/16 Gatewing Delair-Tech – – – structural components and assemblies
• The agreement, valid until 2024, includes both the renewal of
04/29/16 TCR International 3i Infrastructure $200 4.3x 5.3x existing work on the 737 MAX, 747-8, 777 and 787 platforms, as
well as several new packages on the 777X
12/21/15 Marlink Altamir, Apax Partners $437 – –
• Manufactures metal and composite structures, servo-systems
06/05/15 Industrial Control $21 – – and sub-assemblies
Teledyne Technologies
Machines • A joint venture between Dassault Group and Fokker
Technologies (GKN Group)
01/21/15 Cassidian Belgium PARTER Capital Group – – – • Focuses on “plug and fly” integrated structures, actuation
systems and MRO and upgrades of platforms and equipment
01/08/15 Carat Security Group Axle Holdings – – –
09/29/14 Barco (aerospace and Esterline $189 1.0x 7.4x • Manufactures aerospace structures, such as movable wing
defense display business) leading edges and wing skins, for civil, military and space
markets
04/24/14 Mecar Giat Industries $165 – –
• LMI Aerospace (US$432, 2017) – provides structural assemblies,
kits and components and design engineering services to the
03/04/13 ADB PAI Partners $270 1.3x – aerospace and defense market
Sources: CapIQ, Export.gov, Marketline, GlobeNewswire
Stephen Perry Alyssa Morrisroe Ilana Germaine Manu De Vries Stefan Goethals Tom Van de Meirssche
Managing Director Managing Director Vice President Director Head of Corporate Finance Senior Associate
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 +32-2-429-22-53 +32-2-429-32-10 +32-2-429-32-19
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com manu.devries@kbcsecurities.be stefan.goethals@kbcsecurities.be tom.vandemeirssche@kbcsecurities.be
Aerospace & Defense Market Insights
Country Overview | 2017
China Aerospace & Defense Overview
In 2016, the aerospace and defense industry in China continued to grow due to increases in defense spending and changes to the Catalogue of Industries for
Guiding Foreign Investment, which expanded the range of approved investment activities of foreign entities into the aviation sector. These changes should
allow foreign companies to manufacture small scale aircraft parts, including aircraft engine components and bearings, and drive foreign M&A and direct
investment activities. In 2016, China’s defense budget was the second largest in the world, as it rose 6.2% to US$192.0 billion. China’s military expenditure as
a percentage of GDP is only 1.9%, which is low compared to other countries like India (2.3%), the US (3.3%) and Russia (5.4%), indicating additional capacity to
increase military spending. The President of China, Xi Jinping, reduced armed forces personnel by approximately 13.0% (300,000 people) earlier this year as
part of China’s ongoing restructuring to modernize its military with robust cyber warfare and joint operation capabilities.
The commercial aerospace sector has also seen rapid growth, and China’s domestic aviation market is expected to become the world’s largest by 2035,
surpassing North America and Europe with 1.9 trillion revenue passenger kilometers projected by 2035. Within the next 20 years, 6,810 new aircraft would be
required to meet this growing travel demand. Domestic and global demand for travel has caused the country to enter the commercial aircraft manufacturing
business itself in order to reduce dependency on Boeing and Airbus. Chinese state-owned aircraft manufacture, COMAC, plans to produce a 158 seat sing-
aisle aircraft, with 570 order commitments received from 23 customers. COMAC believes that its new aircraft, the COMAC C919, has a market potential of
nearly US$100 billion, and additionally has entered into a joint venture with UAC in Russia to develop a wide-body jet, the COMAC C929.
Public Comparable Companies COMAC C919 Spotlight
($ in US millions) Key Statistics
Market LTM TEV / LTM LTM EBITDA
Cap TEV Revenue EBITDA Margin First Flight May 5th 2017
AVIC Aircraft $7,141 $6,726 $3,724 NM 2.8%
Boeing 737
AECC Aviation Power $6,917 $9,234 $3,249 22.5x 12.4% Competition
Airbus A320
China Avionics Systems $3,863 $4,378 $1,005 24.0x 13.5% • The COMAC C919 is a 158 seat, narrow-body twinjet Current Order 570 orders
AviChina $3,683 $5,708 $5,275 10.9x 9.7% airliner developed by Chinese aerospace Count 23 buyers
Avicopter $3,552 $3,204 $1,767 25.6x 6.8% manufacturer COMAC
• Multinationals have played a large role in the List Price US$50 million
China Aerospace Times Electronics
$3,031 $3,431 $1,731 23.6x 8.1%
development of the C919, with GE supplying engines
Mean 21.3x 8.9% and avionics and Honeywell supplying navigation Estimated Sales
2,000 units
equipment and fly-by-wire controls (20 years)
Trading metrics as of 6/6/17. Valuation multiples based on LTM financial data as of 3/31/17
Select Recent Chinese Acquisitions of Western A&D Firms Select Company Profiles
($ in US millions) TEV / TEV / ($ in US millions)
Date Target Acquirer TEV Sales EBITDA Company Financials Commentary/Investments
11/16/16 Gardner Aerospace Chengdu Aerospace $406 2.2x –
• China Aviation Planning and Design Institute
Superalloy Technology
(US$342M) – Provides technical consultation
10/04/16 Airwork Holdings Zhejiang Rifa Holding $314 2.6x 6.2x services to the A&D industry
Group Sales: $56,537
• Tainjin Aviation Mechanical and Electrical
EBITDA: $5,265
07/15/16 SR Technics Switzerland HNA Aviarion Group – – – (US$115M) – Develops and manufactures
Cash: $14,634
secondary power and fireproofing systems
04/11/16 Gategroup Holding HNA Group $1.923 0.6x 13.5x • Aritex Cading (US$108) – Manufactures production
and assembly lines for aeronautic companies
01/12/16 Aritex Cading AVIC International $124 – –
• SR Technics – Provides MRO services for the civil
aviation sector
11/23/15 AIM Aviation AVIC Aerospace – – – Sales: $15,547 • Gategroup Holding (US$1,923) – Provides airline
International EBITDA: $2,730 catering and provisioning services worldwide
04/05/15 Danbury Aerospace Continental Motors – – – Cash: $17,549 • Asia Jet Partners – Offers aircraft management, on
(AVIC International) demand charters, jet card membership, and
12/05/14 Align Aerospace AVIC International – – – consultancy services
10/23/13 TIMCO Aviation Services Hong Kong Aircraft $393 1.1x 13.4x • TIMCO Aviation Services (US$393) – Aircraft MRO
Engineering Company Sales: $1,775 provider to commercial, government and private
01/03/13 Enstrom Helicopter Corp. Chongqing Helicopter $60 – – EBITDA: $140 customers
Investment Cash: $168 • GE Engine Services Xiamen (US$43) – Provides MRO
02/28/11 Cirrus Design Corp. China Aviation Industry $210 – – and aviation services for engine operators
General Aircraft
Sources: CapIQ, Dacis, Deloitte, NY Times
Stephen Perry Alyssa Morrisroe Ilana Germaine John Zhang Angela Chen Paul Liang
Managing Director Managing Director Vice President Principal Principal Managing Director
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 +86-138-1736-9958 +86-138-1613-2926 +86-21-5012-0990
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com j.zhang@hfg.oaklins.com a.chen@hfg.oaklins.com p.liang@hfg.oaklins.com
Aerospace & Defense Market Insights
Country Overview | 2017
India Aerospace & Defense Overview
The Indian aerospace and defense (A&D) industry is one of the fastest growing A&D industries worldwide. The Indian aerospace industry, an approximate
US$16 billion market, currently ranks in the global top 10 aerospace industries and is predicted to become the third largest aviation market by 2026. As the
A&D market continues to increase, India will require 1,850 new commercial aircraft worth US$265 billion, over the next two decades. The robust expansion in
commercial aviation creates similar augmentation within the A&D supply chain subsectors, particularly within the maintenance, repair and overhaul market
(MRO). The Indian government aims to continue expanding the MRO industry by offering exemptions on paying customs duty, airport royalties, value-added
taxes and ensuring adequate land available for MRO service centers.
The Indian defense industry also continues to expand quickly. The Indian defense sector budget (US$50.7 billion) became the fourth largest global defense
budget in the world and will continue to grow to US$56.5 billion by 2018 as the country seeks to bolster its military. The Indian government offers several
policy initiatives aimed at strengthening the local defense industry. In 2016, the Indian government removed regulations barring foreign A&D firms from
holding more than a 49.0% stake in local ventures. This relaxation of FDI regulations will assist India in becoming a key A&D manufacturing hub. The easing of
regulations also spurred Boeing to announce, in November 2016, plans to invest in a factory to produce the F/A-18 Super Hornet fighter jet. Additionally,
reports exist of Lockheed Martin’s plan to shift their F-16 production facility to India. As more favorable regulations are introduced, large A&D firms will
continue to invest in India’s burgeoning A&D industry.
Public Comparable Companies Hindustan Aeronautics Limited (HAL) Spotlight
($ in US millions)
Market LTM TEV / LTM LTM EBITDA
Business Description
Cap TEV Revenue EBITDA Margin
Bharat Electronics $5,840 $4,530 $1,287 16.6x 20.9% HAL produces various aircraft, helicopters and
engines and provides MRO services
Dynamatic Technologies $253 $337 $231 13.2x 10.9%
Taneja Aerospace and Aviation $21 $25 $6 17.8x 24.0%
Select Segments Description
Sika Interplant Systems $11 $11 $5 27.3x 7.6%
High Energy Batteries $10 $15 $7 14.4x 14.6% Space • Engaged in manufacturing various space structures
Kavveri Telecom Products $4 $37 $4 N/M 8.9% • Offers aircraft, helicopter and power plant MRO
MRO
Mean 17.9x 14.5% services
Trading metrics as of 6/19/17. Valuation multiples based on LTM financial data as of 3/31/17 Aircraft • Manufactures five various military aircraft
Select Recent A&D Transactions Select Indian Company Profiles
($ in US millions) TEV / TEV /
Date Target Acquirer TEV Sales EBITDA Company Commentary/Investments
08/14/15 India Aviation Training AXISCADES Engineering $41 1.3x – • Manufactures and supplies electronic products for the defense
Institute Technologies sector
06/26/14 Thales Software India L&T Technology – – – • Offers communication, radars, naval systems, opto electronics,
Services electronic warfare systems, weapon system, tank electronics
and simulators products
02/06/14 Deepti Electionics & Global Strategic – – –
Electro-Optics Technologies • Offers aerospace components, assemblies and aircrafts
07/09/13 Sansera Engineering Citi Venture Capital $57 0.6x – • Defense Land Systems India (2013) – manufactures purpose built
International special military vehicles
02/07/13 Cades Studec CADES Digitech – – –
Technologies • Offers missile, radar, unmanned aerial, aero-structure,
01/29/13 BF Elbit Advanced Bharat Forge – – – command and control and homeland security solutions
Systems • Aurora Integrated Systems (2012) – manufactures systems and
09/21/12 Aurora Integrated Tata Advanced Systems – – – subsystems for commercial and military applications
Systems • Offers engineering services to the aero engines and aerospace
06/06/12 Pranita Engineering Gardner Group – – – and defense markets
Solutions • EDF Engineering und Design im Fahrzeugbau (2015) –
12/29/11 Saertex-Kemrock Kemrock Industries and – – – manufactures components, assemblies and vehicle body
Aerospace India Exports structures for the aerospace and automotive sectors
• Offers airframe structures and precision aerospace components,
07/01/11 Sigma Microsystems Skanda Aerospace – – –
including wing and rear fuselages, ailerons, wing flaps and flap
track beam assemblies and other airframe structures
02/01/11 Aero Accessories and VXL Salarpuria Sattva – – – • Oldland Aerospace (2008) – manufactures aerospace
eTech components and offers precision engineering parts
Sources: CapIQ, Deloitte, Export.gov, The Investor, McKinsey, Forbes, MRO Network
Stephen Perry Alyssa Morrisroe Ilana Germaine
Managing Director Managing Director Vice President
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.comAerospace & Defense Market Insights
Country Overview | 2017
Mexico Aerospace and Defense Overview
In the last few years, Mexico has experienced an influx of foreign firms establishing manufacturing operations in its aerospace and defense (A&D) sector.
Currently, the aerospace sector in Mexico consists of approximately 310 parts and components manufacturing firms, manufacturing, repair and overhaul
centers (MROs), technical schools and universities, as well as service providers. Nevertheless, Mexican A&D firms do not yet manufacture large aircraft from
start to finish. The Mexican aerospace industry includes five main clusters located in the states of Baja California (Tijuana-Mexicali), Sonora, Chihuahua,
Queretaro and Nuevo León. Overall, the Mexican A&D industry continues to expand with high growth from OEMs and Tier 1 suppliers and more modest
growth from Tier 2 and Tier 3 suppliers. These aerospace hubs continue to attract new players interested in Mexico’s competitive labor costs and incentives
offered by local, state and federal authorities. Mexico’s aerospace manufacturing capabilities continually progress from components, small parts and
harnesses to manufacturing larger sections, such as engines, cockpits parts, wings, etc. Many opportunities still exist in the MRO services, testing machinery,
metal treatments and aerospace molding industries. The Mexican A&D total market value is forecasted to reach US$9.6 billion by 2018 and the number of
A&D firms are expected to grow to 420 within the same period.
ProAero National Strategic Program Chihuahua Aerospace Cluster Highlight
• Beginning in 2012, a 10 year initiative, was developed to place Mexico
within the top 10 global aerospace production countries
• Key strategies include:
- Creating an A&D linked supply chain
- Continued cluster development
- Strengthening human resources, especially technical training • The Chihuahua Aerospace cluster is home to five premier OEMs: Textron
programs Aviation, Cessna and Beechcraft, Honeywell, Hawker and EZ Air
- Developing specialized clusters and R&D labs • The cluster maintains a strong presence in A&D subsectors, such as
- Increasing government incentives, financing and industry turbines, aerostructures, wiring harness, composites, special processes
certifications and treatments, high precision machining, sheet metal, engineering and
• Mexico expects to become one of the 10 largest global A&D countries, design
generating over US$12 billion in exports and having over 110,000 • The cluster boasts 5 million square feet of industrial space, 40 certified
aerospace professionals suppliers and more than 17,000 people in its direct labor force
Select Recent A&D Transactions Select Company Profiles
TEV / TEV /
Date Target Acquirer TEV Sales EBITDA Company Commentary
11/27/14 Procesos Termicos Noranco – – –
• In 2013, Delta and AeroMexico jointly opened a US$40M
7/07/10 CMR Korea Industria de Turbo $45.5 – – heavy maintenance facility
Propulsores • The facility will provide work for 3,000 specialist technicians
09/22/05 Paranetics Technology, Ballistic Recovery – – –
Inc., Mexico Systems • Shifted its assembly plants from Northern Ireland to the
Manufacturing Facility Queretaro region of Mexico
• Employs 1,800 full-time employees
Geographic Breakdown of A&D Firms Present in Mexico • Thirty percent of Bombardier Learjet 85’s are assembled in
Queretaro
• In 2012, opened a new manufacturing facility in Mexicali,
Baja California
• The facility will produce composite structures for the
Sikorsky Black Hawk Helicopter
• Invested US$27M in new Mexicali manufacturing plant that
will generate 250 new jobs
• Expected to employ 2,200 people by 2018 in multiple
Mexicali manufacturing plants
• Invested US$150M and opened two new plants in central
Mexico
More than 50 More than 10, Less than 20 • Safran is the largest aerospace employer in Mexico, currently
More than 20, less than 50 More than 0, Less than 10 employing 5,000 people
Sources: CapIQ, Export.gov, PwC, EY, Pro Mexico
Stephen Perry Alyssa Morrisroe Ilana Germaine Alejandro Rocha Arseny Lepiavka
Managing Director Managing Director Vice President Managing Partner Managing Partner
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 (+52)-55-5292-6700 x105 +52-55-5292-6469
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com Alejandro.rocha@zimma.com.mx arseny007@zimma.com.mxAerospace & Defense Market Insights
Country Overview | 2017
Morocco Aerospace & Defense Overview
The Moroccan aerospace and defense industry continues to experience rapid growth in recent years due to the country’s political stability, competitive
workforce and geographic proximity to Europe. In order to develop the aerospace industry, the Moroccan government offers significant financial incentives,
including corporate tax exemptions, financial subsidies and dedicated aerospace industrial zones. The government created GIMAS, an Institution for
Collaboration (IFC) tasked with developing the Moroccan aerospace sector strategy, and established the Moroccan Aerospace Institute (IMA), an aerospace
labor training center, in hopes of improving the quality and sustainability of its workforce.
The Government of Morocco continues to lure large international aerospace companies to Morocco. Boeing, Bombardier, United Technologies, Safran
Engineering and Airbus are among the 110 international companies currently present in Morocco. The Moroccan aerospace and defense industry currently
generates US$1 billion in annual turnover, claims 17% average yearly growth since 2010 and employs over 11,500 people. As the international demand for new
aircraft continues to grow, Morocco should see similar growth within its aerospace industry. The country’s ability to convince major aerospace firms to invest in
Morocco should continue as their skilled labor workforce increases, government incentives remain and political stability persists. Morocco plans to double its
capacity and number of operators, while also creating 23,000 new jobs by 2020.
Select Notable A&D Firms with Sites in Morocco Moroccan Aerospace Incentives
Rabat Financial subsidy equal to 15% of total investment, can reach up to 30% under
specific conditions
For Free Zone Areas: tax free for 5 years and 8.75% afterwards, with exemption on
custom duties
Tanger Five year corporate tax exemption – 17.5% afterwards
,
Financial contribution for training costs: US$6,760 per engineer and US$2,250 per
Nouasser technician
VAT exemption of new equipment imports during first two years of production
Recent Investments into Morocco from Leading A&D Firms
Company Recent Investment
• Airbus, through its subsidiary Stelia Aerospace, has invested
US$41M in its second Moroccan plant. The plant will be located in
Casablanca and will create an additional 400 aerospace jobs
• The plant will specialize in assembling complex subassemblies for
Airbus A320, A330 and A350
• Boeing operates Matis, a joint venture with French aerospace firm
Safran, that produces wire bundles and harnesses
• In Sep 2016, signed an agreement creating a “Boeing Ecosystem”
• The ecosystem project aims to increase aeronautics exports by
US$1 billion and create 8,700 jobs in Morocco
Bouskoura
• Plans to invest US$200M and create 850 new jobs by 2020
• Moroccan plant will produce operation parts for the Bombardier C
Series, Q-Series and the CRJ Series
Casablanca • Latecoere invested US$12M in a factory south of Casablanca
• The new factory will specialize in manufacturing Airbus 320/350
avionics racks and A320 cockpit panels
• Thales is nearing completion of an additive manufacturing and
metal 3D printing technology industrial center
• The center will commence operations in 2018
Sources: CapIQ, Export.gov, GIMAS, Financial Times, Oxford Business Group
Stephen Perry Alyssa Morrisroe Ilana Germaine Hicham Chebihi Hassani Zineb Chaouni Benabdallah Tarik Britel
Managing Director Managing Director Vice President Managing Partner Director Managing Partner
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 +212 5222-37602 +212 5222-37602 +212 5222-37602
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com chebihi@atlascapital.ma z.chaouni@atlascapital.ma t.britel@atlascapital.maAerospace & Defense Market Insights
Country Overview | 2017
Poland Aerospace & Defense Overview
The aerospace and defense (A&D) industry in Poland has experienced substantial growth in recent years. Continual investments from foreign companies,
growing passenger traffic at Polish airports and the modernization of Soviet-era military equipment will continue to drive growth in the near-term. The
aerospace industry has grown immensely over its 80-year history, with now over 120 aviation and aviation-related companies generating over US$900 million
of annual sales and over 23,000 employees operating in Poland. Around 80% of aviation plants are located in south-eastern Poland in one of three aviation
clusters, and 90% of aviation production is exported. Polish aviation companies gain their competitive edge from low labor costs and high quality production
due to significant expertise in treatment of materials, casting, mechanical engineering and electronics. The advanced level of processes used in the Polish
aviation sector is best illustrated by the participation of Avio Polska and GE EDC Poland in the development of the innovative GEnx engine used in the Boeing
747-8 and 787 Dreamliner. In addition, the increased number of passengers traveling through Polish airports, which is expected to grow by 5.5% annually,
reaching 40 million passengers by 2020 and 59 million by 2030, is another strong indication of continued growth in this market segment.
The defense industry in Poland is also poised for growth as the Polish military continuously undergoes changes designed to transform it into a more capable
and mobile force, compatible with NATO troops. In order to modernize, an estimated US$45 billion will be spent between 2013 and 2022. In 2016, the Polish
government allocated US$9.9 billion to the defense budget – 2.0% of the nations GDP. Poland’s Minister of Defense recently announced his intent to increase
defense spending to 3.0% of GDP in the near future.
Key Aerospace Production Regions in Poland Lubawa SA Spotlight
• Investment in the Polish A&D ($ in US millions) Business Description Key Financials
industry is focused in the
south-eastern region of Lubawa manufactures TEV: $61
Poland army, police, border Market Cap: $37
patrol, fire brigade and Revenue: $72
• There are over 120 aviation special force products EBITDA: $7
related companies in Poland,
and 25+ major foreign A&D Product Spotlight Description
firms that have invested in AMP-1 TP • First composite helmet with VPAM certification
the industry
• Advantages of investing in Plate Carrier QRS • Bulletproof vest with quad release system
Poland include a skilled and 10-Seat Offshore Life Raft • High seas airborne inflatable resilient rescue raft
low cost labor force Trading metrics as of 7/25/17. Valuation based on LTM financial data as of 3/31/17
Select Polish A&D Transactions Foreign Companies Invested in Poland
($ in US millions) TEV / TEV /
Date Target Acquirer TEV Sales EBITDA Company Commentary/Investments
05/30/17 Stocznia Marynarki PGZ Stocznia Wojenna – – – • General Electric (GE) partnered with Lufthansa to invest US$270
Wojennej million in Poland to build a plant that will service aircraft engines
07/11/16 Vac-Aero Poland MB Aerospace Holdings – – – starting in 2018
• The plant will be located in Sroda Slaska and is meant to test and
06/30/16 Pratt & Whitney Rzeszow Consolidated Precision – – – repair state-of-the-art engines for the Boeing 747-8 jumbo jets
for Lufthansa and other airlines
Products
• Lockheed Martin’s manufacturing facility in South East Poland,
05/31/13 Aero AT Jiangsu Aviation – – –
PZL Mielec, employs 1,600 people and is the largest Lockheed
Industrial
facility outside the US
03/22/12 LOT Aircraft Agencja Rozwoju – – – • Lockheed Martin signed an LOI with Poland’s state owned
Maintenance Services Przemyslu defense company, Polska Grupa Zbrojeniowa, to expand
09/09/10 PZL-WROCLAW UTC Aerospace Systems – – – manufacturing of defense products in Poland
• AgustaWestland partnered with PZL-Swidnik to provide the
08/18/09 PZL-Swidnik AgustaWestland $127 0.8x –
Polish government with 23 emergency medical service
helicopters
06/11/07 Bilsam Aviation INC Spolka Akcyjna – – – • PZL-Swidnik (US$115) – Polish helicopter manufacturer, acquired
Industries by AgustaWestland in 2009
09/20/06 Polskie Zaklady Lotnicze Sikorsky Aircraft Corp. $80 – –
• In April of 2016, Pratt & Whitney opened a US$57 million facility
10/17/01 EADS PXL Warszawa- Airbus Defence and – – – in south-eastern Poland
Okecie Space • The facility will be used to test, build and assemble advanced
09/24/01 Wytwornia Sprzetu Pratt & Whitney $70 – – aircraft engines, as well as pursue cutting-edge research and
Komunikacyjnego Company development
Sources: CapIQ, Deloitte, Export.gov, Polska, Lockheed Martin, Phys.org, Vertical, Polish Press Agency
Stephen Perry Alyssa Morrisroe Ilana Germaine Maciej Szalaj Henryk Rytwinski Igor Pogorzelski
Managing Director Managing Director Vice President Principal Managing Director Director
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 +48-22-526-88-66 +46-609-364-444 +48-661-231-321
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com m.szalaj@mergers.pl h.rytwinski@mergers.pl i.pogorzelski@mergers.plAerospace & Defense Market Insights
Country Overview | 2017
South Korea Aerospace & Defense Overview
The South Korean aerospace and defense (A&D) industry has continually expanded in recent years with growth in the defense industry due to the increased
militant threat of North Korea. The industry is estimated to have reached a market size of US$20.0 billion at the end of 2016, with the aerospace segment
totaling US$7.4 billion, representing 37.0% of the industry’s overall value. The growing defense segment totaled US$12.6 billion, representing 63.0% of the
overall industry value. The South Korean government’s defense budget was US$38.6 billion in 2015, representing a 3.6% rise from the previous year and
solidifying its position as the tenth largest military spender worldwide. In an effort to modernize its military force and meet alliance specified requirements,
the South Korean government has initiated US$12 to US$14 billion worth of U.S. Foreign Military Sales acquisition programs, a steep increase from previous
years.
The South Korean commercial aerospace industry is driven by local companies Korea Aerospace Industries (KAI) and Korean Air, one of the largest commercial
airlines in the country. Subsidiaries of KAI and Korean Air manufacture and assemble integral parts for aerospace giants Boeing and Airbus, and are active in
developing indigenous aircraft, including UAVs, rotary wings and fixed wings. In 2015, KAI won the bid for the US$17 billion KF-X project from the Korean
government, which will be paid out through 2025. Korean Air has a total of 159 aircraft, and is also very active in providing maintenance, repair, and overhaul
(MRO) services for both commercial and defense aircraft. The Korean MRO market is estimated to be US$3 billion in 2014 and is expected to grow 23.5% to
US$3.7 billion market by 2020.
Public Comparable Companies Spotlight: KAI’s Participation in $15 Billion T-X Trainer Program
($ in US millions) Market LTM TEV / LTM • Korean Aerospace Industries (KAI) has teamed with
Cap TEV Revenu LTM EBITDA Lockheed Martin to bid for the Advanced Pilot
Training (APT) project worth US$15.2 billion to the
Korea Aerospace Industries $5,614 $6,246 $2,775 16.0x 14.1% US Air Force
Hanwha Techwin $2,351 $2,954 $3,265 10.8x 6.3% • The APT project is being implemented to replace
LIG Nex1 $1,595 $1,925 $1,626 18.7x 6.3% old trainers and introduce about 350 new units
S&T Dynamics $250 $65 $426 3.0x 5.1% • “In the history of Korean defense industry, there
hasn’t been a deal as large as this one,” said Ha
Aerospace Technology Of Korea $223 $313 $79 28.1x 14.3% Sung-yong, CEO of KAI
FIRSTEC $157 $203 $141 42.6x 3.4% • Another strong contender for the bid is a
Mean 19.9x 8.2% consortium comprised of Boeing and Swedish
aerospace and defense company Saab Group
Trading metrics as of 6/6/17. Valuation multiples based on LTM financial data as of 3/31/17
Select Recent A&D Transactions Select Company Profiles
($ in US millions) TEV / TEV / ($ in US millions)
Date Target Acquirer TEV Sales EBITDA Company Financials Commentary/Investments
07/03/17 Hanwha Defense Hanwha Land Systems $584 – – • Korea Aerospace Industries (KAI) manufactures fixed
Systems and rotary wing aircraft and airframe components
Sales: $2,775
07/27/16 Hanwa Thales [JV] Hanwha Techwin $254 0.4x – • KAI has been the target in five minority stake
EBITDA: $390
(50%) acquisitions over the past six years, most recently
Cash: $21
08/08/16 Asia Pacific Aerospace $15 – – selling an 18.9% stake to The Export-Import Bank of
Asia Pacific Satellite
Korea
Communications
• Hanwha Techwin participates in the security solution,
03/30/16 Doosan DST Hanwha Techwin $609 1.0x –
engine and energy equipment and defense program
Sales: $3,266
businesses
10/10/15 CMR Korea K&H – – – EBITDA: $207
• Doosan DST (US$609) – Manufactures defense
Cash: $123
products, provides optics/navigation systems and
06/24/15 Dodaam Systems Suncore $15 0.4x – various training products
04/16/13 Oneseen Skytche LS CNS – – – • LIG Nex1 offers various weapon systems worldwide
Sales: $1,626
• Product offerings include precision guided munitions,
EBITDA: $102
08/31/11 Unconsystem Firstec $5 1.2x – intelligence, surveillance, and reconnaissance
Cash: $28
products and command and control systems
08/30/10 DACC-Aerospace Lotte Chemical – – –
• S&T Dynamics provides products for defense, auto
07/30/10 Samsung Thales Hanwha Techwin $176 0.3x – Sales: $426 parts, machine tools, casting and pipe making
EBITDA: $22 industries
02/10/09 C & Space RENetworks $11 – – Cash: $191 • S&T Brake (US$3) – Produces and supplies break pads,
lining products and break assemblies
Sources: CapIQ, Deloitte, Export.gov, The Investor
Stephen Perry Alyssa Morrisroe Ilana Germaine Chester Kim Kyung Woo (Chris) Kim Dalho Kim
Managing Director Managing Director Vice President Principal Senior Associate Associate
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 +82-10-6265-3888 +82-10-9462-9264 +82-10-2337-5154
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com cjkim@sunp.co.kr kwkim@sunp.co.kr dhkim@sunp.co.krAerospace & Defense Market Insights
Country Overview | 2017
Sweden Aerospace and Defense Overview
Despite its relatively small size, the Swedish aerospace and defense (A&D) industry is recognized as a world-class A&D region as a result of strategic
importance and the country’s strong focus on technology development. Employing approximately 12,000 people, the Swedish A&D industry annually
generates about US$3.3 billion in turnover and imports around US$450M of aircraft parts. The Swedish aerospace market is particularly active in the cutting-
edge A&D technology, such aero engines, avionics, space applications and communications and positioning systems. Strong development of opportunities
exist within the avionics, aircraft parts and components sectors due to increased airline passenger traffic and a skilled workforce.
As the Swedish aerospace industry continues to grow, the defense industry also exhibits expansion. One factor of growth stems from recent Russian
aggressions, which is spurring the Swedish Government to increase spending on defense from its present budget of US$5.1 billion to US$6 billion by 2020.
Sweden’s arms export industry, a US$1.2 billion market, also contributes to the strong defense industry growth, but faces challenges due to the government
seeking to pass legislation barring the selling of arms to non-democratic nations. The country’s top defense contractor, SAAB, has already warned if the
proposed legislation were accepted, the company may have to relocate its R&D out of Sweden.
Public Company Comparables SaaB Company Spotlight
($ in US millions)
Market LTM TEV / LTM LTM EBITDA Business Description Key Financials
Cap TEV Revenue EBITDA Margin Saab AB provides products, services TEV: $5,319
Hexagon $17,235 $18,672 $25 21.1x 25.2% and solutions for the military, defense Market Cap: $5,394
SKF $9,573 $11,152 $8,365 9.7x 13.3% and civil security markets worldwide Revenue: $3,277
EBITDA: $291
Saab $5,394 $5,319 $3,277 18.4x 8.7%
Beijer Alma $877 $925 $413 13.0x 16.9% Select A&D Segment Services Offered
AQ Group $514 $527 $391 12.8x 10.2%
Aeronautics • Air power systems and military aviation
Mean 15.0x 14.9% Dynamics • Combat weapons systems
Industrial Products • Produces aircraft wings, flaps and doors
Saab Kockums • Develops solutions for naval environments
Trading metrics as of 6/19/17. Valuation multiples based on LTM financial data as of 3/31/17
Surveillance • Surveillance, support and systems
Select Recent A&D Transactions Select Company Profiles
($ in US millions) TEV / TEV /
Date Target Acquirer TEV Sales EBITDA Company Commentary
4/13/17 Quintus Technologies AB Kobe Steel Ltd. $115 1.3x –
• Arcam AB provides additive manufacturing for the
8/19/16 NanoSpace AB GS Sweden $3 – – production of various metal components
• Acquired by GE Aviation on Nov. 29, 2016
10/4/16 Safearo i Trelleborg AB Textron Inc – – –
• GKN Aerospace is a Tier 1 multi-technology aerospace
supplier that manufactures various aero structures, engines,
9/06/16 Arcam AB General Electric $629 9.4x 164x systems and also provides MRO services
Aviation • GKN Aerospace, formerly known as Volvo Aero AB, was
8/15/16 Callenburg Technology J.F. Lehman & Co $64 – – purchased from Volvo in Jul. 2012
Group • Hexagon AB offers engineering services in the aero assembly,
1/25/16 Signal Processing Devices e2v Technologies plc $18 4.5x – aero engine, defense and space exploration fields
Sweden • Acquired Apodius GmbH in Aug 2016, a provider of
measurement solutions for composite components to the
3/20/15 Tactel AB Panasonic Avionics – – –
A&D and auto industries
Corp
8/15/16 ThyssenKrupp Marine Saab AB $50 0.2x – • SKF AB provides products, solutions and services in rolling
Systems AB bearings, seals, mechatronics and lubrication systems areas
• The aerospace division supplies products that support
12/03/12 CybAero AB AeroVironment $3 – –
airframe, aero structures and gearboxes
7/5/12 Volvo Aero Corp GKN plc $835 0.3x 7.2x • Trelleborg AB provides solutions for aircraft engines, flight
control systems, landing gear, safety equipment, airframe
and ground support equipment
• The company’s primary aerospace products include aircraft
sealing solutions, engineered coated fabrics, fire resistant
coatings and thermal insulation
Sources: CapIQ, Export.gov, SKF, Business Insider, SAAB, Arcam, GKN, Hexagon, Trelleborg
Stephen Perry Alyssa Morrisroe Ilana Germaine Adel Koubaa Anders Ingler Sven-Ake Lewin
Managing Director Managing Director Vice President Managing Partner Partner Partner
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 (+46) 8 459 82 50 (+46) 8 459 82 42 (+46) 31 799 65 16
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com adel.koubaa@avantus.se Anders.ingler@avantus.se lewin@avantus.seAerospace & Defense Market Insights
Country Overview | 2017
United Arab Emirates Aerospace & Defense Overview
The United Arab Emirates (UAE) leverages its proximity to international trading routes and central location to strengthen its position in the global travel and
aviation markets. The UAE aviation sector is valued at US$80 billion and accounts for nearly 15% of the country’s GDP. Significant contributions to the UAE’s
robust civil aerospace market include two world-class airlines (Emirates and Etihad), two budget airlines (Fly Dubai and Air Arabia) and the Dubai World Central
(DWC) Airport, which will be the world’s largest airport when completed in 2030. Within the aerospace and defense (A&D) supply chain, maintenance, repair and
overhaul (MRO) and aircraft decommissioning and recycling opportunities exist due to a lack of nearby MRO and decommissioning facilities. The Dubai MRO
market is forecasted to grow significantly from US$4.2 billion to US$8.8 billion, and the Dubai decommissioning and recycle centers are predicted to increase
US$500M annually for the next 10 years. Furthermore, as the UAE’s A&D manufacturing and MRO industries blossom, many opportunities will continue to
develop for international companies to partner with UAE OEM firms. As the UAE continues to focus on becoming the gateway to global markets, specifically in
the Middle East, North Africa and South Asia (MENASA) region, companies across all aerospace subsectors benefit, particularly airspace management, digitization
and business aviation. Defense expenditures, as a proportion of GDP, have remained comparatively high in recent years in response to rising Islamist extremism
in the region, persistent tensions with Iran and the UAE’s participation in the Saudi-led coalition’s military efforts in Yemen. The country is looking to decrease its
dependency on defense imports through the development of its own defense manufacturing capability and bolster the Advanced Military Maintenance, Repair,
and Overhaul Center (AMMROC).
UAE Airline Wide Body Aircraft Orders UAE Government Investment in A&D
A380-80 150
777-300 21
777x 48 • Genoa, Italy • Abu Dhabi, UAE
• Manufactures • Produces various
• Sovereign wealth and maintains components for
A350 XWB 10 fund mandated to various business Boeing, Airbus,
777x invest in Abu Dhabi’s and military Alenia Aermacchi,
72
economy aircraft FACC AG and
• Developed Al Ain SABCA
Aerospace Park,
A320 26 25km2 of land solely
A350 62 for aerospace
projects
777 26 • Abu Dhabi, UAE • Zurich,
787 61 • Provides MRO Switzerland
services • Provides MRO
Select Recent UAE A&D Transactions services
($ in US millions)
TEV / TEV /
Date Target Acquirer TEV Sales EBITDA
4/24/17 AWAS Aviation Capital Dubai Aerospace – – –
Designated Activity Enterprise (DAE) • Dubai, UAE • Dubai, UAE
• Leases • Largest
9/20/16 Jordan Aircraft Maintenance Dubai Aerospace – – –
Limited (JorAMCo) Enterprise (DAE)
• Sovereign wealth commercial commercial airline
fund mandated to aircraft in the Middle East
8/01/16 TOG Manufacturing Dubai International $5 – –
invest in Abu Dhabi’s
Capital
economy
8/28/14 Armac Systems Mubadala – – –
• Invested in 33
Development
portfolio companies
5/8/14 Abu Dhabi Aircraft Etihad Airways $1 – – • Dubai, UAE • Dubai, UAE
in various industries,
Technologies (ADAT) • Low cost • Offers various
including A&D
5/6/14 Piaggio Aero Industries Mubadala – – – commercial cargo, logistics
Development Co airline and airport
services
6/14/13 Automatic Screw Machine – – –
Products
Sources: CapIQ, Emirates, Export.gov, Planespotters, DACIS
Stephen Perry Alyssa Morrisroe Ilana Germaine Maheur Mourali Rayan Lazaar Rakaan Alsalloun
Managing Director Managing Director Vice President Managing Director Senior Associate Associate
(949) 769-3323 x302 (949) 769-3323 x306 (949) 769-3323 x308 (+966) 2 657-4160 x204 (+971) 4 384-1608 (+966) 11 211-0737
sperry@janescapital.com amorrisroe@janescapital.com igermaine@janescapital.com mmourali@swicorp.com rlazaar@swicorp.com ralsalloum@swicorp.comYou can also read
