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
| Sep 12, 2014
Total immersion: Has virtual reality's time finally come?
The emergence of low-cost VR technology means that anyone with a few hundred bucks and a decent workstation can get in the game. But, as our experts reveal, pulling off VR is not so simple.
| Sep 12, 2014
Will on-site parking remain king in the development world?
In spite of the trend away from multi-car residences, not much has changed with regard to parking spot allocations within apartment buildings and other multi-unit residential developments, writes GS&P's Doug Sharp.
| Sep 11, 2014
5 competing designs unveiled for Presidio Parklands in San Francisco
To turn the underdeveloped area by Chrissy Field into new public space, San Francisco's Presidio Trust unveiled the five designs by five teams they invited earlier this year.
| Sep 11, 2014
Cintas invites public to vote for 'America's best restroom'
For the 13th consecutive year, Cintas Corporation is back with its popular America’s Best Restroom Contest. A team of survey editors once again scanned the country for the most creative and clean public restrooms and produced a crop of nominees sure to please.
| Sep 10, 2014
Ranked: Top transit facility sector AEC firms [2014 Giants 300 Report]
Leo A Daly, URS, and Skanska head BD+C's rankings of the largest transit facility sector design and construction firms, based on the 2014 Giants 300 Report.
| Sep 10, 2014
Must See: Shape-shifting architecture that responds to heat
Students in Barcelona have created a composite material using shape memory polymers that can deform and return to their original state when activated by cues like heat, humidity, and light.
| Sep 10, 2014
Lessons for the shore: Bolstering resilience of the built environment
Nearly 32 million people, or 28% of the East Coast's population, live in areas lying within a mile of a shore line. The good news is that municipalities are starting to take action, writes Sasaki Associates.
| Sep 9, 2014
Using Facebook to transform workplace design
As part of our ongoing studies of how building design influences human behavior in today’s social media-driven world, HOK’s workplace strategists had an idea: Leverage the power of social media to collect data about how people feel about their workplaces and the type of spaces they need to succeed.
| Sep 9, 2014
Ranked: Top religious sector AEC firms [2014 Giants 300 Report]
Brasfield & Gorrie, Gensler, and Jacobs top BD+C's rankings of the nation's largest religious sector design and construction firms, as reported in the 2014 Giants 300 Report.
| Sep 9, 2014
Take a look at the hardhat of the future
A Los Angeles-based startup added augmented reality technology to a hardhat, creating a smart helmet.
