Future of Aerospace industry Role of M&A in it’s forthcoming growth Global Trends Rzeszów, 26 June 2012 Adam Czechanowski Senior Manager, Audit Jakub Podleśny Manager, Tax

© 2012 Deloitte Poland Deloitte’s Survey Footer2

© 2012 Deloitte Poland Mergers and Acquisitions in A&D industry Deloitte’s Survey Research sample: 89 public companies from all over the world Survey Time: April 2011 Scope of the study: M&A transactions from 31/12/2000 to 31/12/2010 – 10 years In total study includes 70 North American companies (79%), 16 European companies (18%) and 3 companies representing the rest of the world (3%) Sectors: Services, OEM, Tier 1&2 Suppliers 3 89 analyzed companies made 1,995 acquisitions for a combined value of $336 billion

© 2012 Deloitte Poland Historical and macroeconomic factors

© 2012 Deloitte Poland Mergers and Acqusitions in A&D industry Historical and macroeconomic factors The A&D industry has traditionally seen dramatic increases in M&A activity following periods of decline (such as ). As a response to the general economic uncertainty, many A&D companies have been stockpiling cash. Current total cash balances of the US’ A&D companies exceed an estimated $70 billion. Valuations of A&D firms appear to be at historic lows. 5

© 2012 Deloitte Poland Subsectors - characteristics

© 2012 Deloitte Poland Mergers and Acqusitions in A&D industry Subsectors characteristics (1): Services and OEM Out-performers invested 40% of their investments in services companies, roughly four times as much as the segment’s under-performers. OEM are among the only industry entities whose leading prospects in M&A lie outside their segment. Many OEMs have made expansion into aftermarket, IT, and mission system- related services a strategic imperative, and acqusitions can help to accelerate OEM’s entry into those spaces. Services companies can enhace their market position by acquiring other companies from the same segment. 7

© 2012 Deloitte Poland Mergers and Acqusitions in A&D industry Subsectors characteristics (2): Tier 1&2 Suppliers The activities of OEMs in the 1980s and 1990s demonstrated how consolidation in the A&D industry could lead to scale economies and improved negotiating positions with suppliers and channel partners As their customers’ negotiating power has improved, perceptive Tier 1 suppliers have begun imitating them and consolidating as well. Tier 2 suppliers have begun responding in kind. The consolidation trend continues down the value chain. 8

© 2012 Deloitte Poland Summary

© 2012 Deloitte Poland Mergers and Acqusitions in A&D industry Summary The era of mega-mergers of large defence contractors is behind us. Targeting companies whose business models enhance the company’s market power. Consolidation within Tier 1 and 2 suppliers, and services companies – an increasingly attractive target for OEMs. Services companies predominantly acquire other services companies. OEMs, as a segment, are the most acquisitive segment, comprising over 50 % of M&A activity. Both OEMs and Tier 1 suppliers are using M&A to expand their position in the value chain, moving into both upstream and downstream segments. Tier 2 suppliers predominantly buy other Tier 1 and Tier 2 suppliers. 10

© 2012 Deloitte Poland A&D industry forthcoming growth Deloitte – value added. We are right here. Globaly Deloitte has extensive industry experience with aircraft manufacturers, suppliers, operator and services companies We have helped our clients execute effectively across the full M&A life cycle: strategy development, target screening, due diligence (including accounting and tax), tax structuring and valuation as well as integration planning. Our R&D and Government Incentives Team can assist with the whole process of filing a R&D claim from scoping through document preparation and submission. Our Audit Department employes professionals with an experience working with major A&D companies, such as AVIO. We are in Rzeszów since Our regional office is headed by Grzegorz Koszel, Senior Manager in Deloitte Audit and Jakub Podleśny, Manager in Deloitte Tax Advisory. 11

© 2012 Deloitte Poland Deloitte Contact Details Adam Czechanowski Senior Manager, Audit Krakow Office Phone: Jakub Podleśny Manager, Tax Advisory Phone: Rzeszów Office Tel: Fax: ul. Rejtana Rzeszów

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