In mature industries like Aerospace and Defence (A&D), M&A is a key tool of corporate strategy. The combination of unexpected competitive pressures (challenging supply chains, consolidation and pricing pressures) and a more frugal customer base is a one-two punch that the A&D industry is unfamiliar with. Therefore, the race for competitive advantage increasingly relies on initiatives to reshape the scale, scope, and depth (manufacturing parts in-house) of a company’s capabilities.
Given these challenges, it is little surprise to see two of the big-hitters consolidate in one of the largest deals in aviation history. More importantly, it raises the question as to whether more firms will see M&A as the viable option to challenge a competitive cost pressure environment?
The transaction, one of the biggest in aviation history, gives rise to an aircraft-parts giant better positioned to withstand the squeeze from planemakers Boeing Co. and Airbus SE for pricing discounts and higher output. The resulting company will boast a broad suite of products for commercial aircraft, from Rockwell Collins’s touchscreen cockpit displays to jet engines made by the Pratt & Whitney division of United Technologies.