With 29 transactions in the first quarter of this year in the global engineering and construction sector, dealmaking in the industry appears to be reversing course from a quiet 2009, according to the PricewaterhouseCoopers LLP report, “Engineering growth: First-quarter 2010 global engineering and construction industry mergers and acquisitions analysis.”
Merger and acquisition value in the sector totaled $21.2 billion in the quarter compared to $3.8 billion and $23.7 billion in the first and fourth quarters of 2009, respectively.
On a year-over-year basis, 2010 is looking strong, with both the volume and the value of deals increasing substantially during the first quarter. The acceleration in M&A activity comes as no surprise, in that only 15 deals valued at just $2.6 billion were announced all of last year, the report notes. The pickup in dealmaking may suggest that many of the factors that adversely affected deal activity in early 2009—such as the lack of credit availability and weak global demand—have moderated, which bodes well for deal activity in 2010.
Additionally, a strong rebound in mega-deals (transactions of at least $1 billion) has occurred during the first quarter of 2010, with four transactions announced, the report shows.
Conversely, no mega-deals were announced in the first quarter of last year and only seven were reported for all of 2009.
“Although many macroeconomic factors have improved, others, like pervasively high unemployment and weak housing fundamentals, remain concerns,” said Kent Goetjen, U.S. engineering and construction industry leader at PricewaterhouseCoopers. “We anticipate companies with stronger relative share prices, stronger balance sheets, or affordable access to capital markets will increasingly look to M&A this year for expanding into new markets, driving innovation, and broadening their products or capabilities while their competitors are still struggling to improve fundamentals.”
M&A targets located in North America, Asia and Oceania, and the UK and Eurozone regions were the primary drivers of deal activity in the first quarter. Transactions involving both U.S. targets and buyers were the key drivers of deal activity, particularly in terms of deal value. Of the 29 transactions announced during the period, nine (31%) involved a U.S. entity. Of the $21.2 billion in deal value announced during the period, 61% was attributable to U.S.-affiliated activity.
More information on the report: www.pwc.com/us/industrialproducts.
PricewaterhouseCoopers' Engineering and Construction practice provides industry-focused assurance, tax, and advisory services.