An evolving market presents many global opportunities to the aerospace and defence industry.
OEMs within the sector are becoming more competitive and therefore a global approach across these organisations and their supply chains could deliver a new joined up approach.
With this in mind, Boyden’s dedicated Global Aerospace & Defence Practice got together to discuss their outlook within their local markets.
Craig Stevens, Managing Partner of Boyden United States has been working for a number of years within the aerospace and defence sector with a consistent track record working with OEMs and their supply chains. Craig witnesses sustainable year-on-year momentum in the aerospace and defence market in the United States with projected growth of 3.6% over the course of 2018. At the same time, Boyden anticipates continued industry consolidation in the United States particularly among Tier 2 and 3 suppliers. This is being driven by both strategic and private equity investment into these businesses as highlighted in the Capstone Headwaters Q2 2018 M&A report.
Craig has identified a clear trend within Boyden’s larger aerospace and defence clients to consider executives for key roles from outside the industry – particularly from leading advanced technology companies. In fact, the most progressive aerospace companies view themselves as bespoke technology companies and Deloitte found this to be a way for companies to gain a competitive advantage over the traditional bureaucratic OEMs.
Lindsay Landsberg, Partner of Boyden United States has recently begun working within the sector and has seen a huge demand and interest for start-up activity particularly within Space & Satellite organisations. This area of expertise is now attracting venture capital and government (DARPA) investment especially into small satellite technology to be used for ubiquitous earth observation, ultra-secure servers and worldwide IOT, worldwide broadband & civil and military intelligence, surveillance and reconnaissance. Via Satellite recently released an article showcasing “10 Space Start-ups that Investors loved” – all of which fall into these categories.
Lindsay has also seen a steady rise of investment in commercial applications for aerospace (vs. defence and government). For example, Boyden United States team based in Chicago recently placed the Chief Revenue Officer for Phase Four, a company funded by Alsop Louie Partners.
Paul Marshall, Principal of Boyden Canada has seen consistent assignments within the Canadian, Ottawa Office. The depth of our expertise has been recognized by the numerous defence technology companies present in this area and who are trying to capture a share of the Canadian Armed Forces business.
Ottawa is also seeing increased activity in the Canadian market as a result of the Naval Shipbuilding Program which is having a positive trickle down effect to the organizations that develop mission-critical systems.
Boyden Ottawa’s current work with General Dynamics Missions Systems, Canada is unique in that they are driving several international programs from the Ottawa market. However, most of the other multi-nationals in Canada serve as ‘beachheads’ in the Canadian market and focus primarily on Canadian business only.
Guy Herbertson, Principal of Boyden United Kingdom has been serving the aerospace and defence sector for over five years. Guy views aerospace as having a unique opportunity to embrace the changes in the UK market and sector. Technology transformation continues to become a bigger factor in supply chain competitiveness, as showcased at the Farnborough International Airshow in their Aerospace 4.0 Zone.
There is uncertainty in the UK market around Brexit and Airbus along with many other conglomerates threatening to pull out of the UK market should there be a no deal situation. Rolls Royce restructuring and making redundancies has certainly caused concern. However, Aerospace, Space & Security have seen continued growth in Revenues & Employees and an alternate view has been offered by BAE Systems. The organisation has suggested that Brexit is no big issue for them and as the largest UK defence employer, that offers some positive sentiment.
Defence has an interesting outlook with military chiefs spending much of their time working on the £20bn shortfall in the defence equipment budget according to the FT. However, plans were also announced for development of the multi-billion pound Tempest, the next generation fighter. It is being viewed as a major proposition that is central to the Brexit plan and to Britain’s ambition to be a major military power.
According to ADS Group, the trade body in the UK for the sector, the UK aerospace sector alone contributed £74bn to the UK economy, £41bn of that coming from exports making it a key contributor to UK plc and the ability to cope with Brexit. Positively, ADS also quoted that July aircraft deliveries reached their highest on record with 116 aircraft delivered worth £2bn to the market.
Kjetil Bjørnson, Managing Partner of Boyden Norway has previously managed the Schlumberger Defence business and sold the company to Kongsberg and therefore offers a unique insight. Kjetil's take on the aerospace and defence market in Norway is that Kongsberg remain the dominant player in defence, the dominant player providing into the local air force, army and naval forces as well as exports globally. The company is listed on the Oslo stock exchange and the government is one of the major shareholders. Against this backdrop the company looks set to continue its success.
With the ongoing programme to purchase 50 F35 aircraft for the Norwegian Airforce l and the next major investment in a joint venture naval program with the purchase of 4 submarines from ThyssenKrupp Marine Systems (TKMS) in Germany, Norway is an interesting market to watch.
With offshore activity being so strong, it is interesting to note that there are some 50 Offshore helicopters being operated by CHC and Bristow in Norway. CHC has a fully licenced manufacturing/maintenance site in Stavanger Norway (Heli One) and there is a sentiment that Norwegian Airlines’ continued profit growth and impact on world’s top 10 low cost airlines will add more value to the Norwegian economy.
Overall Boyden’s Aerospace and Defence Practice believe that the global outlook is positive, with major changes across innovation, consolidation and the way government and the OEMs continue to purchase and exploit their supply chains. Whilst there will be some uncertainty that will present challenges, it will also offer opportunities for those businesses willing to invest in innovation and people.
If you would like a conversation with a local expert from Boyden's Aerospace & Defense Practice then please don’t hesitate to get in touch.