As the Trump administration ramps up military spending, mergers among aerospace and defense contractors may jump as much as 5 percent, according to a survey from investment bank KippsDeSanto & Co.
More than 150 senior executives, nearly half of whom represented publicly-traded companies, responded to the survey, with three-quarters predicting the number of government services deals would increase this year, two-thirds of them forecasting gains in defense and a little more than half projecting gains in aerospace.
Participants cited both government investment and increased capital after last year’s reduction in the top corporate tax rate to 21 percent from 35 percent as enabling factors and said the primary goal for dealmakers would be gaining new products and technologies. Another third ranked adding customers as their top priority, according to the Tysons Corner, Va.-based firm, which conducted the survey in the first half of 2018.
Earlier this year, President Trump followed through on a campaign promise to increase U.S. defense spending when he signed a $1.3 trillion bill to fund the government through September. The package provides $700 billion for defense for the government budget year through Sept. 30 and $716 billion for the 12 months after that.
Such support is “very or extremely” influential in mergers and acquisitions as well as valuations of the companies involved, 83 percent of survey respondents said. Respondents were split on valuations, with about half predicting increases of up 15 percent and the other half predicting no change.
