Boeing Co. (BA) is an aerospace and defense technology company that develops and manufactures commercial jets, military aircraft, weapons systems, and strategic defense and intelligence systems. It also provides support services to customers as well as financing for orders and deliveries. Boeing operates four separate business segments: Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital. The company posted a net loss of $11.9 billion on revenue of $58.2 billion in fiscal year (FY) 2020, which ended Dec. 31, 2020. Its market cap was $129.5 billion as of Sept. 30, 2021.
Boeing was founded in 1916 as Pacific Aero Products Co. In April of the next year, founder William Boeing changed the company's name to Boeing Airplane Co. Boeing has grown into one of the leading aerospace companies in the world, its main rival being Europe-based Airbus SE (AIR). Throughout its history, the company has dramatically increased its size through acquisitions. Boeing's takeover targets often have been rivals who fell on hard times or were experiencing slowing growth in key parts of their business.
Boeing has done many of its most important acquisitions to bolster its core aerospace and defense businesses, whose revenue streams tend to be less cyclical because they are primarily generated through government contracts. But Boeing has acquired other companies to strengthen its ability to supply parts and services to its commercial and military customers. Below, we look at five of these acquisitions in more detail.
McDonnell Douglas Corp.
- Type of Business: Aerospace, Avionics, and Defense
- Acquisition Price: $13.3 billion (announced)
- Acquisition Date: Dec. 15, 1996 (announced); Aug. 1, 1997 (completed)
McDonnell Douglas was formed in April 1967 out of the merger between McDonnell Aircraft Corp. and The Douglas Co. By the time the company was acquired thirty years later by Boeing, its principal activities were the research, development, and manufacturing of aerospace, commercial and military avionics, and defense electronics products. However, McDonnell Douglas' strength in the commercial aircraft market had been waning by that time, which was one of the reasons the Federal Trade Commission (FTC) found nothing anticompetitive about the acquisition and approved it. The deal combined the largest commercial-jet manufacturer in the world with a significant player in the military-aircraft industry. The combined companies accounted for 60% of the global market for large commercial jetliners at the time, helping Boeing increase capacity in order to stay competitive with rival Airbus. However, the acquisition also led to a change in culture at Boeing, a change that many regarded as being more focused on short-term financial gain than on continuing to maintain and strengthen the company's engineering excellence.
Rockwell International Corp. (Aerospace and Defense Segments)
- Type of Business: Aerospace and Defense
- Acquisition Price: approximately $3.1 billion (announced and completed)
- Acquisition Date: Aug. 2, 1996 (announced); Dec. 6, 1996 (completed)
Rockwell International has its origins in the 1967 merger between North American Aviation and Rockwell-Standard Corp. The two companies combined to form North American Rockwell Corp. In 1973, North American Rockwell became Rockwell International. Nearly a quarter century later in December 1996, Boeing acquired Rockwell's aerospace and defense units, forming a subsidiary that was renamed Boeing North American. Rockwell at the time was divesting assets in an attempt to refocus its business on faster-growing businesses such as manufacturing automation, semiconductors, and automotive. The two segments acquired by Boeing made missiles, sensors, space shuttles, aeroplane parts, weapons, and space systems. The acquisition was expected to significantly boost Boeing's defense and aerospace businesses, especially space systems and information/battle management systems.
Hughes Electronics Corp. (Space and Communications Businesses)
- Type of Business: Space and Communications
- Acquisition Price: $3.8 billion (announced and completed)
- Acquisition Date: Jan. 13, 2000 (announced); Oct. 6, 2000
Hughes Electronics was formed in 1985 as a subsidiary of General Motors Corp. (GM) named GM Hughes Electronics. The company was a provider of telecommunication services and a leading satellite manufacturer. It was renamed Hughes Electronics Corp. in 1995. Five years later in 2000, Boeing acquired Hughes' space and communications businesses from GM. Analysts expected the Boeing takeover to help Hughes amid a slowdown in the satellite manufacturing business, where profit margins were relatively low. Boeing integrated the units into a new business segment called Boeing Satellite Systems. The acquisition transformed Boeing into the world's largest producer of commercial communications satellites. The deal also increased Boeing's space-related revenues and enhanced the company's growth prospects in information and communications products and services. These businesses were identified as key areas of growth over the next decade.
- Type of Business: Aviation Parts and Related Aftermarket Services
- Acquisition Price: $1.7 billion (completed)
- Acquisition Date: May 1, 2006 (announced); Sept. 20, 2006 (completed)
Aviall had its origins in the early 1930s when three aircraft service and parts supply organizations merged into one company. That was the first of a number of mergers that ultimately led to the creation of Aviall. By the time Aviall was acquired by Boeing in 2006, it had become the world's largest independent provider of new aviation parts and related aftermarket services. It was a supplier of a range of aviation batteries, hoses, wheels and brakes, and paint services. Aviall, which was Boeing's largest acquisition since the late 1990s, became a wholly owned subsidiary of Boeing. The newly acquired company would report to Boeing's Commercial Aviation Services segment in support of the company's strategy to offer a broad range of value-added products and services to commercial and military customers.
- Type of Business: Aerospace Parts Distribution and Related Services
- Acquisition Price: $4.25 billion (announced)
- Acquisition Date: May 1, 2018 (announced); Oct. 9, 2018 (completed)
KLX became an independent, publicly traded company as a result of B/E Aerospace Inc.'s spinoff of its consumables management segment in 2014. It was acquired four years later by Boeing and had, by that time, evolved into a major independent provider of new aviation parts and aftermarket services with approximately 2,000 employees and customer service centers in more than 15 countries. KLX was marketing and distributing products to approximately 2,400 manufacturers at the time. The acquisition, which then was Boeing's biggest in nearly 20 years, strengthened Boeing's position within the $2.8 trillion aerospace services market. The KLX deal had two advantages. It enabled Boeing to offer larger discounts to airlines. The deal also offered Boeing the prospect of higher profits due to the relatively higher margins associated with the aircraft services business.