COSTA MESA, Calif. – June 20, 2008 – While the domestic airline industry faces severe challenges due to skyrocketing jet-fuel prices, the overall commercial aviation sector should continue to thrive in 2008 and beyond.  Development of major new aircraft from Boeing and Airbus is keeping suppliers busy, while demand remains strong for regional jets, business jets and very light jets.  Dealmaking activity is robust, with strategic buyers pursuing acquisitions to control costs and secure new value-add product lines and cash-rich private equity groups aggressively competing for middle-market acquisition candidates.

These were among the observations shared by McGladrey Capital Markets LLC (formerly RSM EquiCo Capital Markets) at the global investment bank’s third annual Aerospace & Defense Conference, held last week in Southern California.  The industry forecast was presented by Paul Weisbrich, senior managing director and head of the firm’s Aerospace & Defense Investment Banking Group.

Following are among the other forecasts offered by McGladrey Capital Markets:

• The outlook for the U.S. defense segment is mixed, with Department of Defense spending expecting to peak in 2009 and decline in real terms after that.  The most attractive opportunities in the segment are in Future Combat Systems and Reset Spending.
• The aviation supply chain will continue to consolidate, particularly within the subsystems and component manufacturing sub sectors.
• Deal values in the second half of 2008 are expected to be 15–20 percent higher than the first half.

"Aerospace and defense continues to be one of the busiest sectors for mergers and acquisitions," said Weisbrich.  “U.K. and European companies are actively seeking a broader U.S. footprint, softness in the U.S. dollar has made American companies particularly attractive to international buyers, and the regulatory environment has been relatively supportive.  At the same time, second- and third-tier suppliers are aggressively looking to consolidate operations and expand capacity.  Our A&D bankers are very busy with projects that will impact the market over the next 12 months.”

McGladrey Capital Markets’ Aerospace & Defense Conference, which attracted more than 60 senior-level industry executives, featured a keynote address by retired British Maj. Gen. Charles Vyvyan, who framed the threat of terrorism in international terms.  Other participants included Joseph Berenato, chairman and chief executive of Ducommun Inc., who discussed the globalization of the A&D supply chain, and Dale Mizer, director of business development for HITCO Composites Inc., who noted that his company’s parent, SGL/HITCO, recently committed to investing $80 million in capital equipment and plant improvements in Southern California.  Also featured was a panel discussion featuring principals from three private equity firms active in the A&D sector:  Mark Jrolf, partner, Heritage Partners; Ted Kramer, partner, Hammond, Kennedy, Whitney & Company; and Jeff Weber, principal, Veritas Capital.

Copies of the Ducommun, HITCO and McGladrey Capital Markets presentations can be found here.

About McGladrey Capital Markets

McGladrey Capital Markets LLC (www.mcgladreycm.com) is a global provider of investment banking services to private and public companies with annual revenues of up to $1 billion.  The firm’s services include mergers, acquisitions, divestitures, recapitalizations, capital raising, fairness opinions and restructurings.  McGladrey Capital Markets, which offers in-depth expertise in 12 distinct industry sectors, brings together companies, capital and creativity on a national and international scale to help clients achieve their personal and strategic objectives.

McGladrey Capital Markets is affiliated with RSM McGladrey Inc., a professional services firm providing accounting, tax and business consulting.  Both firms are units of H&R Block Inc. (NYSE: HRB), the world’s preeminent tax services provider.

McGladrey Capital Markets’ international headquarters are located in Costa Mesa, Calif.  It also has offices in Chicago, Boston, New York and London.  The firm is a member of FINRA and SIPC.