Finance, Taxes, Insurance
Interest Rates, Ukraine Contribute to Lull in M&A Activity
High borrowing costs resulting from elevated interest rates hurting cash flow
Pratt & Whitney mechanics inspect PW1100G
RTX took a charge of between $3 billion and $3.5 billion over several years thanks to the PW1100G's latest manufacturing problem. (Pratt & Whitney)

In the aerospace industry and throughout the global economy, merger and acquisition (M&A) activity can serve as a barometer for economic health. During times marked by strong market fundamentals, M&A activity tends to accelerate as healthy balance sheets make companies ripe for dealmaking. Today, the aerospace business finds itself in a tepid M&A environment, thanks largely to the increased cost of capital wrought by inflation and soaring interest rates.

According to a recent report by KPMG, M&A activity plunged by nearly 20 percent from 2019 to 2020 with the onset of the Covid pandemic, which forced aerospace and defense companies to cut production and capacity. Now, persistent supply chain constraints, the war in Ukraine, and labor shortages have largely offset the resumption of air travel and resurgent demand for aircraft.