Deal Alert: United Technologies’ $22 billion takeover of Rockwell Collins

Categories : Procurement Stages
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Published on : Aug 31 2017

By: IBISWorld Analyst, Connor DiGregorio

In what would be one of the largest M&A deals of 2017, United Technology Corp. is close to striking a deal to acquire the aircraft-equipment maker Rockwell Collins Inc. At the current share price, the deal would be valued in the neighborhood of $22 billion. The move would expand United Technology’s aerospace division considerably and further consolidate related aerospace markets.

By adding to its already extensive line of aircraft products, United could start to create a headache for airplane manufacturers like Boeing and Airbus, both of which depend on parts suppliers to fill niche needs for their final products. The takeover could mean prices creeping higher in markets such as Aircraft Maintenance & Repair and Navigational Equipment Maintenance and Repair. If the price to manufacture airplanes increases, this could inflate costs for several downstream buyers from commercial airlines to the US military.

Additionally, United Technologies and Rockwell Collins are both large contractors for the military and other government defense agencies. Unfortunately, government procurement departments could see a decrease in negotiation power when soliciting bids in related markets, due to increasing market share concentration.

It should be noted that talks are not finalized yet and the offer could be rejected by Rockwell Collins’ shareholders. However, the company’s share price is currently at an all-time high, even boasting 40% growth year-to-date, making it unlikely that such a generous sale price would be passed over.