As inflation continues to reduce the value of each dollar and fears of a recession loom, many sectors are already seeing retractions in the mergers and acquisitions marker. In aerospace and defense M&A, things are more complicated. A&D is its own unique world, and broader trends don’t always land here the way they do in other industries. For instance, the COVID-19 pandemic was a boon to many industries, but commercial aviation saw stunning losses. Anticipating trends can help players in this sector remain agile. Here are five trends that we predict will affect A&D M&A in the coming year. 

Decreased Access to Capital 

It’s a simple rule, with profound implications: higher interest rates make capital less accessible. Coupled with inflation and a recession, buyers just don’t have as much cash on hand as they did even a year ago.This may slow M&A, mean that buyers are more discerning, and reduce valuations. 

Ongoing Regulatory Challenges

Aerospace and defense face an increasingly tight regulatory climate. DoD has expressed concerns about the potential for monopolies to form as the industry consolidates, and has promised to carefully scrutinize all deals with even theoretical national security implications. This may slow down deals, and even be the death knell for some particularly large deals. 

Mitigating Supply Chain Risks 

Supply chain issues were already becoming a problem at the beginning of the COVID-19 pandemic. The pandemic, a tight labor market, and international upheaval from the Russian invasion of Ukraine have made things even tighter. Key players may make a shift from global to regional sourcing, especially of parts and raw materials. This may change pricing schemes and budgets, and alter the manufacturing process. Thoughtful A&D companies should create as much visibility into their supply chains as possible, so that they can anticipate and mitigate emerging supply chain risks before they become crises. 

Managing Labor Shortages 

Labor shortages have proven catastrophic for industries across the globe. A&D is no exception, especially because of the ways in which these shortages affect manufacturing. These shortages may increase budgets and erode value. They may mean that everything takes longer. A&D companies should assume that the labor shortage is here to stay, not a temporary disruption. The time to begin developing a long-term strategy for nurturing, recruiting, and retaining top talent is here. For many A&D businesses, automation and artificial intelligence are becoming pillars of the strategy for managing labor shortages. 

What can your business do to be the most attractive place in your industry to work? Do it now. Because a business’s people are key drivers of its value during M&A. 

Adopting Sustainable Practices 

Consumers and governments are increasingly concerned about carbon emissions and reining in unsustainable manufacturing practices. Some contracts may even require sustainability benchmarks. Sustainable aviation fuels are becoming mainstream, and renewable electricity may also offer a viable alternative. To remain competitive, A&D companies must develop sustainability policies that reduce their dependence on fossil fuels and ensure that A&D can continue to thrive into the future. 

It’s no secret that aerospace and defense have seen significant disruptions in recent years, thanks to political turmoil, shifting administrations, international conflicts, and the ongoing aftershocks of the COVID-19 pandemic. As the industry consolidates, mergers and acquisitions play an increasingly important role in building strong businesses. Disruptions in the M&A process waste time, money, and talent, and may make the next merger even more difficult. A comprehensive A&D investment banking strategy can help reduce the risk of failed deals. Here are the most important strategies to consider. 

Regulatory Considerations

Because of the potential for national security concerns, antitrust challenges, and international political issues, A&D mergers receive much tighter scrutiny. The Department of Defense recently announced its intent to more closely oversee A&D deals, with an eye toward preventing monopolies and protecting national security. Your deal may be subject to a number of regulatory issues, including: 

• Novation: You may need governmental consent to proceed with a deal, especially if one or both parties has a government contract. 
• Antitrust concerns: DoD is becoming more aggressive in its goal to prevent monopolies. In many cases, buyers may need Hart-Scott-Rodino Act approval. Failure to seek this approval could subject buyers to tens of thousands in fines each day. 
• Export controls: Before putting an A&D business on the market, sellers should do their own due diligence to assess whether export control issues could affect the deal. 
• National security: The Committee on Foreign Investment in the United States (CFIUS) reviews foreign investments in mission-critical industries, such as A&D, to assess for national security issues. If such an issue arises, it could slow or kill the deal. 

Proposal Protections 

Federal agencies generally have to consider M&A activity when considering bids. It’s common for A&D contractors to change ownership, and doing so is usually not a problem—but only if the M&A activities is disclosed during the bidding process. Government contractors pursuing government bids must disclose ongoing M&A activity. New M&A activity may require specific approval, depending on the terms of the contract. 

A Specialized Due Diligence Process

Due diligence is always complicated, but in many industries, it requires only gathering and compiling the right paperwork. A thoughtful approach to A&D M&A requires both sellers and buyers to prepare well ahead of time, with a comprehensive due diligence project. Not only must sellers ensure they can document earnings, projections, and other financial figures. They must also guard against common legal and regulatory pitfalls. Both buyers and sellers must consider: 

• Whether the deal is subject to special regulatory measures, such as export controls, and what additional steps must be taking to comply with regulations. 
• Whether the DoD is likely to apply closer scrutiny to the deal because of growing antitrust concerns. 
• How the deal might affect national security. 
• Whether any specific contracts pose significant liability or regulatory issues requiring additional scrutiny. 

Ideally, an experienced M&A attorney should evaluate the overall risk of the deal well ahead of serious integration planning. Working with an M&A investment banking advisor is also critical, since their experience in the industry may help with flagging problems early and mitigating risk. 

Aerospace and defense investment banking continues to boom thanks to industry consolidation. But also, increased regulatory oversight and market contractions in anticipation of a recession loom large in the background. This makes hiring the right A&D investment banking firm more important than ever. It’s easy enough to review interview questions online and then trust your gut. But how do you really know you’ve hired the right investment banker for your needs? Asking specific questions that require documentation can help you assess whether you’re making the right choice. 

How many deals did you close last year, and in what industries? 

This helps you assess whether the banker is serious about your industry, or just a part-timer dabbling on the side. Knowing how many deals they successfully closed is also a great number to have, especially as compared to the number of contracts they took on. Because if they’re not closing any deals, they may not be giving their contracts their full attention. 

What are my business’s biggest assets and liabilities in terms of M&A? 

A savvy investment banker should be able to give you a thoughtful assessment of your business. Someone who just wants you money, by contrast, may offer a lot of bluster and false promises, but few tangible details. This question helps you weigh how carefully the banker has thought about the specific issues your business faces. 

Who can I talk to about their experience with you? 

Selling a business is a major decision. If you have a good experience with this investment banking firm, you’ll likely be willing to talk to others about it. The same is true of your investment banker’s past clients. If they can’t give you several recent references in your industry or a related industry, it’s a significant red flag. 

What deal structure do you advocate for, and how do you determine value? 

What matters here is not so much the specific answer, but that they have an answer. A good investment banker will give you specifics about the methodology they use in assessing your business’s value. They can also offer feedback on the type of deal structure they think is most likely to work well for your business. Pay attention to what they advise, and the path they say is most likely to get you where you need to be. 

Who will be working on my deal, and what will they be doing? 

It doesn’t matter how competent the firm is if you’re going to be working with an intern and a junior partner, or if the team only intends to devote an hour a week to your deal. Get very clear about what it is you’re paying for, and from whom. Ask also about the specific services you’ll get for your fees. Ideally, the investment banking firm should charge a success fee and a reasonable retainer. This incentivizes hard work, but reduces the risk that the firm will pressure you into a deal that’s not in your best interests. 

A&D M&A is a massive undertaking, but there are plenty of opportunities for profit and increased synergies. Whether you’re planning retirement, hoping to grow your business, or planning to jump to your next venture, planning is key to successful mergers and acquisitions in this competitive space. Owners and directors in aerospace and defense firms face a unique market. Here are five factors you’ll need to consider. 

Increased Industry Consolidation 

The industry is rapidly consolidating, with large contracts going to the largest players. This trend shows no sign of changing, leaving smaller firms to make a decision: adapt to the change now, or potentially get eaten by a competitor later. Understanding the consolidation trend can help you remain ahead of it, and identify the specific value your firm might provide to a larger player. The biggest A&D firms are increasingly seeking out add-on platforms with valuable technology, especially in the AI space. 

New and Emerging Technologies 

Supply chain issues continue to assault A&D. Companies that can innovate and work around these issues stand to profit immensely. New technologies, especially those that reduce the pressure of supply chain disruptions, are extremely valuable. Smaller businesses that offer such technologies should consider how they may add significant value to larger players. 

Rising Interest Rates 

Rising inflation and rising interest rates have created the perfect storm: Capital is harder and more expensive to get, and worth less. This trend is likely to persist for the coming months, and possibly longer. This means that, if you know you want to sell, the safest and most profitable time to do so is now. The future is highly uncertain, with potentially less cash available. So A&D firms must be prepared to act quickly and get expert advice. 

Increased Deal Scrutiny 

A&D mergers can affect national security in a way that many other industries do not. For this reason, they are subject to additional scrutiny. The Department of Defense recently announced its concerns about a trend toward more consolidation in the industry, and its intention to apply even more scrutiny to A&D deals, especially those that might shift the power balance in the wider industry. This may slow deals, require significant legal support, and demand more documentation. Deal makers must be prepared, and adjust their deal timelines accordingly. 

The Need for Additional Support 

A DIY approach to A&D M&A has never been a wise strategy. In today’s climate, it’s even less so. The pandemic has shown how quickly things can change, and the supply chain crisis has illustrated how quickly outside forces can shake an entire industry. Expert insight is critical for managing regulatory complexities while understanding trends in the industry and the wider economy. The right A&D M&A firm can help market your business, identify key value drivers, recruit the right buyer, and negotiate the deal, so you can continue operating your business. They can also offer significant support for regulatory, legal, and financial concerns, lending more certainty in a challenging but promising economic climate. 

Technology is central to aerospace and defense businesses, even when a company does not perceive itself as a tech company. In aerospace and defense M&A tech due diligence is more than just good business. It may also be a matter of national security. The aerospace and defense sector is increasingly the target of cyber criminals, with airlines facing the most significant attacks. Technology due diligence can protect the newly formed entity against these attacks, ensure full ownership of valuable intellectual property, and make the case for the sale price when a company owns valuable digital properties. Working with a skilled A&D investment banking firm can help your company effortlessly navigate due diligence. Prepare for the process by asking these questions. 

Is all of our software in compliance? 

It’s common for companies to retain unlicensed software, to use the same access code for various programs across computers, or to use products from developers who might not have had full usage rights to the software they used. Conduct a thorough licensing check on all software you use, and retain that information in a single location for easy reference.

Who owns our intellectual property? 

If you have valuable intellectual property—whether it’s a brand trademark, in-house software, or even a popular blog—it is critical to know who owns it. Did oyu outsource some of the work to a contractor? What about component parts, such as digital images or lines of code? Every A&D company needs airtight intellectual property agreements before moving toward a merger or acquisition. Don’t just use something you find online. A good intellectual property lawyer is key here, especially if you have highly valuable IP. 

Are there ongoing technological issues or glitches? 

If part of what you’re selling is technology—and it almost always is—then you must make sure that all of your technology works flawlessly. Too often, companies treat glitches like a missing step—something to just step over and learn to ignore. A buyer won’t ignore these issues, and may change their assessment of your business if you don’t fix them. Consider how easy your software, computers, and other technological properties are to use, and make any necessary changes now. 

What have we done to protect our company? 

How is your cyber security infrastructure? Have you audited for potential problems? Are there easy opportunities for hackers, or employees who will easily fall for phishing scams? A secure company is a valuable one, with significantly less exposure. Consider bringing in a cuber security firm to audit your operations and correct any shortcomings before a buyer discovers them. 

What specific technological aspects of our company lend additional value to this deal?

Every deal is unique. Understanding the unique value proposition of your own company is key to attracting the right buyer and seeing the deal through to completion. What specific technological assets matter most? Identify these early in the process, then ensure all is as it seems—from licensing to ownership contracts. 

The A&D M&A bonanza in the United States has greatly consolidated the industry. This has attracted the attention of the Department of Defense, which recently announced its intent to provide greater regulatory oversight. As a result, A&D firms and contractors may be looking across borders to find enticing deals. Early evidence suggests that European aerospace and defense mergers and acquisitions may be about to take off. 

It’s in some ways a surprising development, as NATO members have long garnered American criticism for failing to meet minimum defense expenditure thresholds. The Ukraine conflict has the potential to change that, and with it, to alter the landscape of European defense spending, and ultimately European A&D M&A. NATO spending, long a political complaint by American elected officials against European diplomats, might finally take off. And with it could come a fundamental shift in A&D M&A, at least over the short-term. If Russian aggression continues, this could even be a longer lasting change. 

NATO guidelines require member nations to spend at least 2% of their annual economic output on defense. It’s a threshold just four NATO members have managed to meet: Latvia (2.5%), Greece (2.6%), Romania (2.3%), and Estonia (2.4%). Notably, larger nations with larger budgets have consistently failed to approach this threshold, with the larger European Union expending just 1.2% of its budget. For Germany, one of the wealthiest nations in the EU, the figure is just 1%. 

Russia’s stunning invasion of Ukraine has shown that aggression poses a real threat to EU members, and has revived interest in defense spending. Ukraine had once aspired to join the EU and NATO. Now it’s unclear whether it will even continue to exist. While the conflict has decimated much of Ukraine’s economy and inspired widespread European uncertainty, defense may enjoy a sudden boom and a new cold war. 

We’re already seeing signs of defense deals doubling, with the U.S. encouraging increased defense spending across Europe in the last few years. 2021 generally saw increases, with 52 deals last year. This figure soared above 2019’s previous high. And with deal value at an estimated 27 billion Euros, 2021 nearly doubled 2019’s high of 11.7 billion Euros. Even before the invasion, there were signs that years of cuts might finally reverse. 

Rising public defense spending will undoubtedly feed the private sector. Still, though, it’s an unpredictable industry. National security woes have historically complicated cross-national defense mergers and acquisitions, even between historic allies. However, American buyers are increasingly interested in comparatively less expensive European businesses and the assets they offer. 

Ultimately, rising defense spending could become a tool of diplomacy, encouraging bad across to think twice before invasions and threats. For now, though, we should expect increased spending and manufacturing, as well as a potential deal bonanza. 

Preparing for A&D M&A requires a thoughtful, well-executed strategy, and plenty of planning, whether you’re on the buy-side or the sell-side. The right advisory team is critical, especially for firms looking to capitalize on this unprecedented and surprising growth. 

The Russian invasion of Ukraine has set in motion a chain of events unprecedented in the contemporary defense landscape. The West is reassessing its military might, and Europe is accelerating defense spending. The aerospace and defense sector stands to reap the benefits, with a potential flurry of M&A. The spotlight has finally come for this often-overlooked sector. A&D investment banking may soon see a surge. 

We predict that increased defense allocations will spur new opportunities in the lower middle market. 

In its Private Equity Opportunity in Aerospace and Defense report, KPMG reports that the 2021 DoD budget projected 1.5% annual growth in the coming five years—a very small increase. But in the United Kingdom, defense is accelerating at a rapid clip, with a projected 10-15% beyond its current budget of $58 billion. This occurred before Russian aggression, suggesting that Russia could change everything, leading to a defense spending bonanza. 

The United States and Russia: Tough Decisions

Fundamentally, the U.S. will ultimately have to decide whether it intends to engage in Russia, directly or indirectly. New technologies have shifted the defense landscape, and may alter what conflict looks like. Europe’s aging defense infrastructure necessitates the purchase of American-made equipment. Moreover, supply chain delays have revitalized interest in shoring up the American defense supply chain. All of this spells opportunity for the lower middle market—still, though, the nature of that opportunity is heavily dependent on American decisions about the Russian conflict. 

New Supply Chain Opportunities

With rising concerns about dependency on foreign manufacturing sites, much of the supply chain has returned to the United States. This spells opportunity for American businesses, offering lower middle market firms a fine opportunity to profit from increased defense spending. 

Defense contracts are sensitive, suggesting firms should vertically integrate services. This doesn’t always happen. Lower middle market firms still have much to contribute. Technology is one key example, and cybersecurity continues to be a priority across the industry. 

What About the Buy-Side?

Lower middle market businesses aren’t the only potential beneficiaries of new defense changes.TheCOVID cash flow crunch will force reintegration of tier 3 and 4 suppliers. This means more opportunities for private equity. But opportunity isn’t always easy. Generalist PE firms will face significant hurdles. The defense industry is complex and difficult, and the sell-side tends to prioritize industry insiders with real expertise. It’s critical to understand the defense contracting process. PE firms must be willing to obtain the expertise they need. 

As governments move swiftly to strengthen their defense capabilities, we expect a rapid influx of cash in the A&D sector. But will these changes last? Russian aggression could spur a new generation of defense competition and building. Or it could be a temporary blip that quickly goes away. Industry insiders don’t know which way the pendulum will swing. For now, though, A&D companies that have the expertise to capitalize on the new surge of cash can serve their countries and their investors. Now is an excellent time to innovate, and an exceptional time to consider A&D M&A. 

DoD recently announced its intent to crack down on consolidation in aerospace and defense.  A new report supports this plan, highlighting significant concerns about lack of competition in the defense industrial base—a challenge that industry experts say could affect the nation’s ability to defend itself and its allies. 

Industry Consolidation 

Consolidation is the leading reason for decreased competition. Of the 51 A&D contractors in the industry in the 1990s, just five remain in the present day. The report did not establish a link between consolidation and increased pricing, but it did raise concerns about strategic innovation, national security, and mission risk. It additionally asserts that having a single source or only a small group of sources for a defense need presents significant national security risks. 

Challenges of Data Rights and Intellectual Property

Another key factor driving the lack of competition is the rule introduced in the 1980s governing IP and data rights. Eighty-eight percent of new DoD contracts since 2011 have been awarded for acquisition of commercial items, where a vendor’s exclusive ownership of data rights complicates the contracts. DoD asserts that IP will now be an important factor in defense industry contracts, and in its evaluation of said contracts. 

The Decline of Small Business

Small business participation has declined by 40% over the last 10 years. The DoD report emphasizes the importance of expanding small business participation in contracts, especially disadvantaged and woman-owned companies. DoD has vowed to increase small business participation via outreach to suppliers, existing programs, and reduced barriers to entry. It also intends to use its Mentor Protege, Small Business Innovation Research, and Small Business Technology Transfer programs to welcome new entrants into the space. 

Addressing Entry Barriers

DoD has also expressed its desire to assess and reduce barriers to entry for small and marginalized businesses. In 2021, it published a Federal Register notice soliciting feedback from small businesses interested in joining the A&D space. Feedback from this notice may inform future DoD practices, and identify new priorities. 

DoD has been clear: it intends to promote competition to the greatest possible extent. A&D players who want to thrive in this space, including through M&A should carefully study DoD priorities, and assess ways to support those priorities if they want to succeed in this rapidly changing space. 

Citing concerns about the threat consolidation poses to national security, the Pentagon has announced its intent to increase oversight of defense contractor mergers. In a new report, it outlined a range of recommendations to counteract the reduced competition of a 30 year merger and consolidation bonanza. 

In a statement, the Department of Defense explained, “Having only a single source or a small number of sources for a defense need can pose mission risk and, particularly in cases where the existing dominant supplier or suppliers are influenced by an adversary nation, pose significant national security risks.”

The increased oversight stems in part from a Federal Trade Commission lawsuit against Lockheed to challenge a deal on antitrust grounds. DoD had previously said they wouldn’t oppose deals that bolstered suppliers, as long as the biggest players did not merge. But the number of A&D prime contractors has shrunk from 51 in the 1990s to five today. Weapons are available from a limited range of sources, with just three companies—Raytheon, Lockheed, and Boeing—making tactical missiles. With little competition, there is also little pressure to innovate or to perform well to gain new contracts. A DoD report asserts that this harms taxpayers, given that defense comprises half of federal total discretionary spending. 

The Pentagon has not fully elaborated on its plan to increase oversight over A&D mergers, but prior actions suggest that the DoD is especially concerned about consolidation in the hypersonic weapons sector, where there is intense competition with Russia and China. First-tier material suppliers, prime contractors, and first-tier subcontractors are all poised to purchase lower tiered hypersonic contractors and suppliers, thereby reducing competition—perhaps even eliminating it entirely. 

Players in this sector, as well as all A&D sectors, should plan for increased deal scrutiny. This could slow down deals, require more regulatory oversight, increase the bureaucratic burdens of deals, and potentially render some deals no longer possible. 

Artificial intelligence deals are rapidly accelerating, with GlobalData reporting an average deal value of $159 million. The number will almost certainly increase as technology advances and companies perceive more opportunities. While most growth has occurred in the Asian Pacific, deals in the South and Central American markets are accelerating. A&D companies continue to advance AI Capabilities both organically and via acquisitions. While AI used to be the domain of big tech, defense companies are increasingly using this technology to increase in-house capabilities. 

In the immediate future, we anticipate a growing role for AI both on and off the battlefield. Its potential offerings include unmanned teams, drone swarms, autonomous weapons, and increased surveillance, logistics, and cybersecurity capabilities. 

Modern militaries are increasingly building massive databases. This data deluge poses a significant problem in terms of how to manage and mine such information. AI intelligence can reduce the pressure by analyzing the data and offering actionable insights. It can provide militaries with more information than they ever had before, without exhausting limited resources or requiring significant additional new hires. 

Moreover, the race for AI dominance between the U.S. and China has already begun in earnest. The country with the strongest AI capabilities stands to gain a significant advantage—both in reality and in perception. We anticipate significant government investment in AI technology, boosting contract opportunities and incentivizing A&D companies to innovate. Companies that want to stay ahead of the curve must not only understand the benefits of AI, but also be very realistic about the challenges it poses. Developing strategies to adapt to these challenges before they become a crisis may determine dominance in this space. 

AI poses myriad ethical quandaries, particularly when it comes to the use of autonomous weapons. The complexity of developing new AI solutions that comply with real or anticipated regulations also serves as a deterrent. But A&D companies must cooperate with governments to innovate. China and Russia plan to dominate the U.S., and companies must not shrink away from big innovations that potentially offer big wins. AI is a powerful tool to companies who want to come out on top. Powerful tools present big risks. But companies who wield that risk wisely, who innovate intelligently and deliver on their promises, stand to make massive gains as the market begins looking toward this growing trend. The time to put your AI plan into place is now. Doing so will ensure more contracts, better contracts, and a better range of M&A opportunities down the road. 

It’s increasingly a familiar story in aerospace and defense M&A: a potentially lucrative deal gets tanked when cybersecurity becomes an issue. Due diligence reveals a pattern of issues, and the buyer either backs out entirely or demands a decrease in the price. As ransomware attacks surge, the pattern is sure to accelerate. Whether a seller experiences a cybersecurity breach years before deal or in the midst of one, the consequences are potentially massive. It doesn’t have to be this way. A thoughtful, proactive approach can help lessen the potentially damaging impacts of cybersecurity threats on mergers and acquisitions. 

Practice Full Disclosure 

Sellers must be honest and upfront about any prior or current cyber incidents. Anything less than full, immediate disclosure erodes trust and is an immediate deal breaker for most buyers. Disclosing breaches gives you the opportunity to explain exactly what you have done to manage them. This can build trust and prove that you’re committed to full security. 

Be Proactive

While it’s good to respond intelligently to breaches, it’s much better to prevent incidents in the first place. Invest in quality antivirus software, cybersecurity insurance, and penetration testing. Consider how much a breach would cost you, and don’t cut corners when working with a skilled cybersecurity team. 

Practice Cybersecurity Due Diligence 

Most organizations rely heavily on digital data during the due diligence process. Consequently, this is a prime time for attacks. Moreover, many buyers include a cybersecurity assessment as part of the due diligence process. Buyers are mindful of the increase in ransomware threats, and are focusing more on cybersecurity than at any prior time in history. 

Sellers must be prepared for a due diligence process that considers: 

• prior incidents and incident responses 
• digital assets, including your understanding of network and system architecture
• data flows
• specific vulnerabilities, including via third parties such as vendors and contractors 
• regulatory compliance via internal cybersecurity programs
• your ability to withstand an incident and respond to whatever damage it causes 
• how you will produce financial and other statements if there is a breach during due diligence 

Preparing to Take Action

Cyber incidents are inherently disruptive. During M&A, they are immensely harmful, with the power to cause severe delays and losses, and potentially destroy entire deals.

Aerospace and defense contractors have unique obligations, since a breach can affect national security as well as millions of individuals. There is simply no longer any excuse for outdated or nonexistent security practices. If you want a competitive edge, you must be prepared for the challenges of 21^st century cybersecurity. 

The right security infrastructure—including quality technology and knowledgeable people—are integral to your deal. Ensure you hae them in place at the beginning, so you can head off threats before they occur. 

Artificial intelligence (AI) has the capacity to revolutionize the aerospace and defense industry. According to a new report from GlobalData’s Thematic Research ecosystem, some companies are already well positioned to lead the way. They include Boeing and Leidos. 

The assessment ranked companies on a scale of one to five, assessing their ability to tackle emerging challenges such as artificial intelligence in the A&D industry. Other winners in the report included GE L3 Harris Technologies, Airbus, and AECOM. Each attained a full score of five out of five. Leidos exemplifies the commitment to AI in this group, advertising 1,007 new AI jobs between October 2020 and September 2021. It also registered three artificial intelligence patents, and referenced AI technology in official company filings eight times. 

Boeing showed similarly impressive investment levels, with 793 new AI job listings since October of 2020, with five references to AI in its official filings. More mentions of AI in quarterly filings usually indicates that a company is either profiting from prior AI investments, or that it intends to invest more to catch up with others in the industry. Likewise, more AI deals indicate either market dominance or an attempt to shore up AI offerings using mergers and acquisitions.

Across the board, we are witnessing an increase in AI references and AI-inspired mergers and acquisitions in this sector, which once lagged behind other industries in terms of its embrace of emerging technologies. Top executives are now thinking about AI, and trying to incorporate it into their businesses. Those that can do so successfully gain a leg up on the competition, as well as a competitive edge when selling their business.

Companies with AI offerings may need help to value their AI, to integrate it into their existing business, and to prove AI’s worth. The right M&A advisory firm can help them highlight the value of AI and reap its rewards.