Defense firms' valuations are dropping as sequestration casts a shadow over the industry, leaving companies that were seeking sales in a difficult position. "What we have seen is a real retraction in defense [mergers and acquisitions] since the threat of sequestration first emerged in August 2011," said Scott Thompson, head of the aerospace and defense practice at PricewaterhouseCoopers. Defense company valuations have fallen from a peak of 14.8 times EBITDA to as low as a multiple of 8.7.

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