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 | Jul 23, 2015
CTBUH recognizes Parkroyal on Pickering as Urban Habitat Award winner
The Singapore hotel has green space galore
Sports and Recreational Facilities | Jul 23, 2015
Japan announces new plan for Olympic Stadium
The country moves on from Zaha Hadid Architects, creators of the original stadium design scrapped last week.
Green | Jul 23, 2015
NASA: U.S. headed for worst droughts in a millennium
Data from NASA shows carbon emissions could be the driving force behind devastating water shortages and record droughts in the western U.S.
Airports | Jul 22, 2015
MUST SEE: JFK airport taps Gensler to design terminal for animals
Pets can enjoy luxurious spa and grooming services before being transported directly to their flight from the terminal.
Office Buildings | Jul 21, 2015
Finally! There's a workplace trend that’s worth embracing
There’s a realization by corporate real estate executives that in order to create a successful workplace, there must be alignment between their people, their place, and the tools they have to do their jobs.
University Buildings | Jul 21, 2015
Maker spaces: Designing places to test, break, and rebuild
Gensler's Kenneth Fisher and Keller Roughton highlight recent maker space projects at MIT and the University of Nebraska that provide just the right mix of equipment, tools, spaces, and disciplines to spark innovation.
Architects | Jul 21, 2015
Architecture Billings Index at highest mark since 2007
This is the first month in 2015 that all regions are reporting positive business conditions, said AIA Chief Economist Kermit Baker.
BIM and Information Technology | Jul 20, 2015
New stylus brings digital sketching to the next level
Without buttons, users can change the weight of the stylus’ stroke.
Architects | Jul 20, 2015
New York design competition looks to shed the sidewalk shed
New York, which has nearly 200 total miles of sidewalk sheds, is seeking a concept that is practical but that also looks good.
Cultural Facilities | Jul 19, 2015
SET Architects wins design competition for Holocaust Memorial
The design for the memorial in Bologna, Italy, is dominated by two large metal monolithic structures that represent the oppressive wooden bunks in concentration camps in Germany during World War II.