US aerospace and defense executives are looking at strategic acquisitions and expansion into new markets to promote company growth, according to a recent survey by KPMG.
Faced with tighter federal defense budgets, stiffer competition and a struggling home economy, nearly two-thirds (62 percent) of A&D executives say their companies will be involved in a merger or acquisition as a buyer in the next two years.
In addition, 70 percent of A&D executives indicate that their companies have significant cash on their balance sheets, with 41 percent saying the highest-priority use for that cash will be a strategic acquisition, followed by 19 percent who say they will use the cash assets for expansion into new markets.
"A&D executives are telling us that the business outlook will not be brightening anytime soon. They are rethinking their strategies and becoming more aggressive to drive growth," said Martin Phillips, US and global leader of KPMG's aerospace and defense practice.
US contracts are dwindling and three-year cumulative sales on average have remained flat. "All of these factors set the stage for more aggressive expansion, M&A, and product strategies," said Phillips. "As a result, some companies have deployed a 'grow or die' philosophy, and the results of this survey show that more will adopt that mindset."
Looking ahead three years, nearly half (49 percent) of executives surveyed by KPMG say that non-US operations or customers will account for more than a quarter of their companies' revenues, compared with just 37 percent who currently derive more than a quarter of their revenue from foreign operations. The highest priority foreign markets are Europe, Asia (other than China), and the Middle East.
The KPMG Aerospace & Defense Industry Pulse Survey was conducted in June 2011 and reflects the responses of 100 senior executives in the A&D industry.
