MROAM: M&A activity strong, says ICF SH&E

This story is sourced from Pro
See more Pro news »

There is a "tremendous" amount of merger and acquisition activity in the MRO industry this year, says Jonathan Berger, vice-president at consultancy ICF SH&E at a panel during the MRO Americas conference in Atlanta today.

MRO mergers and acquisitions (M&A) are expected to reach near 90 transactions in 2013, says Berger, citing information sourced from Jefferies Research. This number would be slightly more than the 93 MRO mergers seen in 2012.

Since January there have been at least 16 mergers or acquisitions, the data shows.

The peak for M&A activity in the MRO industry was in 2007, when there were about 153 mergers and acquisitions, he says. After the economic downturn, that number started to drop to about 133 in 2008, and then 70 in 2009. Since then, the numbers have been on the rise.

The topic of mergers also came up during a panel on the relationships between OEMs and MROs. Between the next five to 10 years there could be a "maximum of four or five very large MROs that are all independently operated but definitely aligned with various OEMs", says Kyle Smith, senior vice-president strategic transactions, Mubadala Aerospace. He was discussing the impact of OEMs increasing their reach in the aftermarket.

As for airline mergers, those do not typically produce the expected savings from maintenance that companies may expect, says Berger during the leasing panel.

"The business cases often do not meet the expectations," says Berger, adding that airlines "underestimate the challenges of integrating two maintenance divisions".

Some of those unexpected costs could include moving personnel from one base to another if consolidating maintenance facilities as required under labour agreements. Unexpected costs and complexity could also come in the more intangible form of managing cultural differences between companies based in two different areas of the world.