Merger and acquisition (M&A) activity showed strength in the global engineering and construction industry during the third quarter of 2011, driven by sustained strategic investor activity and the return of financial investors to the market, especially in the mega deals arena, according to Engineering growth, a quarterly analysis of M&A activity in the global engineering and construction industry by PwC US.
“Strategic investors continued to dominate deal volume in the third quarter of 2011, but we also saw financial investors make a strong comeback to lead mega deal activity. Three of the five mega deals had targets in the engineering segment, suggesting an increasing attractiveness in this area, which could indicate growth in the construction segment, as the two sectors are closely-related,” said H. Kent Goetjen, U.S. engineering and construction leader with PwC. “The strength in M&A activity shows that despite financial uncertainty in global markets, engineering and construction companies with solid balance sheets have opportunities to capitalize on good growth prospects in emerging markets.”
In the third quarter of 2011, there were 44 announced deals worth $50 million or more, totaling $18.5 billion, compared to 38 transactions with $14.3 billion in the same period of 2010. Five mega deals, or transactions worth more than $1 billion, accounted for more than $10.3 billion and 55 percent of overall third quarter M&A value. Average deal value remained unchanged at $400 million.
According to PwC, strategic investors represented 61 percent of overall third quarter engineering and construction deal volume, as companies took advantage of strong balance sheets to explore growth opportunities through acquisitions. Meanwhile, financial investors also continued their slow, but steady return, contributing the remaining 39 percent of deals, including all five mega deals. “Increasing activity suggests that financial investors are starting to see value in the current market and view the engineering and construction sector favorably,” added Goetjen.
Targets and acquirers in the Asia and Oceania region continued to be a major driver for engineering and construction deal activity in the third quarter of 2011, representing 24 transactions worth $8.1 billion. “Expectations for greater growth rates, more stable economic performance, and increasingly stronger corporate balance sheets of companies in the Asia and Oceania countries suggest that M&A activity in the region should continue to grow in the quarters to come,” noted Jonathan Hook, global engineering and construction leader at PwC.
Despite an increase in cross-border transactions due to a resurging interest in globalization, global domestic deals continued to generate the most activity in the third quarter of 2011, representing 54 percent of all deals. China was the most active country overall, with six cross-border and four domestic deals, while Malaysia also surfaced as a major player, generating three domestic deals.
“The financial strengthening of companies in China and Malaysia, along with their understanding of the local business environment and greater growth opportunities are likely to continue driving domestic transactions in these emerging markets,” said Hook. “However, despite a spike in deal volume, acquiring local companies in China has not become easier as regulations dictate government approval of deals and the majority of private Chinese enterprises are of a relatively small and young nature.”
Dealmakers in North America and the U.K. and Eurozone region increased contribution to engineering and construction M&A activity in the third quarter of 2011. According to PwC, as these developed markets’ economies continue to recover, the volume and value of future deals in these regions should increase incrementally.
The materials manufacturing segment sustained its leading position in the third quarter of 2011, making up 25 percent of deal activity, followed by the construction segment with 18 percent. Civil engineering also experienced strong and consistent growth, contributing 18 percent of deal activity and the three largest mega deals for the third quarter of 2011. BD+C
Related Stories
Architects | Jun 19, 2017
Preparing to negotiate: Get your head in the game
Logical and well-planned steps to effective negotiation.
| Jun 13, 2017
Accelerate Live! talk: Is the road to the future the path of least resistance? Sasha Reed, Bluebeam (sponsored)
Bluebeam’s Sasha Reed discusses why AEC leaders should give their teams permission to responsibly break things and create ecosystems of people, process, and technology.
| Jun 13, 2017
Accelerate Live! talk: Incubating innovation through R&D and product development, Jonatan Schumacher, Thornton Tomasetti
Thornton Tomasetti’s Jonatan Schumacher presents the firm’s business model for developing, incubating, and delivering cutting-edge tools and solutions for the firm, and the greater AEC market.
| Jun 13, 2017
Accelerate Live! talk: The future of computational design, Ben Juckes, Yazdani Studio of CannonDesign
Yazdani’s Ben Juckes discusses the firm’s tech-centric culture, where scripting has become an every-project occurrence and each designer regularly works with computational tools as part of their basic toolset.
Industry Research | Jun 13, 2017
Gender, racial, and ethnic diversity increases among emerging professionals
For the first time since NCARB began collecting demographics data, gender equity improved along every career stage.
Architects | Jun 7, 2017
Build your very own version of Frank Lloyd Wright’s Guggenheim Museum with this new LEGO set
744 LEGO bricks are used to recreate the famous Wright design, including the 1992 addition.
Multifamily Housing | Jun 7, 2017
Multifamily visionary: The life and work of architect David Baker
For 35 years, architect David Baker has been a spirited voice for affordable housing, in San Francisco and beyond.
Architects | Jun 5, 2017
NCARB launches second alternative path to architect certification
Architects without a professional degree in architecture can now earn NCARB certification through an alternate path.
Architects | Jun 2, 2017
NELSON joins forces with Cope Linder and KA
More growth ahead, as NELSON expects to double its workforce and revenue this year.
Office Buildings | Jun 2, 2017
Strong brew: Heineken HQ spurs innovation through interaction [slideshow]
The open plan concept features a Heineken bar and multiple social zones.