Mega-Merger: What UTC-Rockwell Collins Means For Aerospace
Published on Published on September 25, 2017
Just when it appeared that equipment-supplier consolidation had run its course, United Technologies (UTC) shocked the aerospace industry by reaching an agreement to acquire Rockwell Collins for a cool $30 billion.
UTC Aerospace Systems (UTAS) will be combined with Rockwell Collins and folded into a new business unit named Collins Aerospace Systems with revenues of $23 billion—twice the size of the next-largest equipment supplier. This doesn’t include Pratt & Whitney’s $15 billion aeroengine business. This mega-merger raises three questions:
Why did it happen? First, UTC likes the aircraft systems business. Its $18 billion acquisition of Goodrich in 2012 is perceived as successful, and the acquisition addresses three of the most attractive segments in aerospace: avionics, interiors and defense electronics. Second, Collins is a superb company. It has invested in the future, its operations are lean, it posted 18-19% operating margins over the last five years, and it delights its customers. The Collins aftermarket organization is widely viewed as best-in-class, and its opportunistic acquisitions of ARINC and B/E Aerospace expanded its markets.