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 | Dec 16, 2015
Architects create commission for diversity advancement
The 20-member group will assess recent data, set a plan of action, and report on results to the AIA Board of Directors.
Architects | Dec 15, 2015
ULI names Lord Richard Rogers the 2015 J.C. Nichols Prize winner
Rogers, Founder of Rogers Stirk Harbour + Partners, works on projects that “shine a spotlight on the challenges that people in urban areas are facing."
Market Data | Dec 15, 2015
AIA: Architecture Billings Index hits another bump
Business conditions show continued strength in South and West regions.
Architects | Dec 14, 2015
New LEGO line lets builders construct iconic skylines
New York City, Berlin, and Venice are featured in the Architecture Skyline Collection.
Architects | Dec 14, 2015
Date named for announcement of 2016 Laureate of the Pritzker Architecture Prize
The Laureate will be named the morning of January 13.
Architects | Dec 9, 2015
Architecture firms Cooper Carry and The Johnson Studio merge
The combination is expected to bolster each firm’s hospitality-related services.
Industry Research | Dec 8, 2015
AEC leaders say the 'talent wars' are heating up: BD+C exclusive survey
A new survey from Building Design+Construction shows that U.S. architecture, engineering, and construction firms are being stymied by the shortage of experienced design and construction professionals and project managers.
Architects | Dec 4, 2015
Denise Scott Brown and Robert Venturi win 2016 AIA Gold Medal Award
The husband and wife architect team—founders of VSBA Architects and Planners—are the award's first joint winners.
Architects | Dec 3, 2015
LMN Architects wins 2016 AIA Architecture Firm Award
The firm is known for projects like Vancouver Convention Centre West and the University of Washington’s Foster School of Business.
Greenbuild Report | Dec 1, 2015
Data centers turn to alternative power sources, new heat controls and UPS systems
Data centers account for 2% of the nation’s electricity consumption and about 30% of the power used annually by the economy’s information and communications technology sector, according to the National Renewable Energy Laboratory.