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
| Apr 18, 2013
SOM, CASE team up to launch crowd-sourced apps library
SOM and CASE have formally launched AEC-APPS, the first crowd-sourced, web-based library for applications used by architects, engineers and construction professionals. This is a one-of-a-kind initiative in the AEC Industry and is a non-profit online community that allows digital tool users and toolmakers to share ideas, tips and resources.
| Apr 18, 2013
Calatrava projects encounter issues with water, structure, Guardian says
A dozen years after Calatrava built the spectacular Ysios winery in the rainy Alava region of northern Spain, the building's dramatic, undulating roof continues to let in the damp.
| Apr 17, 2013
Frank Lloyd Wright's Park Avenue showroom demolished
New York loses another architectural gem by Frank Lloyd Wright as new owner razes auto showroom.
| Apr 17, 2013
First look: Renzo Piano's glass-domed motion pictures museum
The Academy of Motion Picture Arts and Sciences last week released preliminary plans for its $300 million Academy of Motion Picture Arts and Sciences museum in Los Angeles, designed by Renzo Piano and local architect Zoltan Pali.
| Apr 16, 2013
5 projects that profited from insulated metal panels
From an orchid-shaped visitor center to California’s largest public works project, each of these projects benefited from IMP technology.
| Apr 16, 2013
AIA/NCARB survey shows rosier picture for emerging professionals
In 2010, the AIA/NCARB Internship and Career Survey of emerging professionals took a snapshot of young designers during a time ofintense economic contraction, when they were often the first to suffer. But in the two years since, emerging professionals have begun experiencing a rebound.
| Apr 15, 2013
Seattle school certified as world's fourth Living Building
Bertschi School, an independent elementary school in the Capitol Hill neighborhood of Seattle, Wash., is now home to the first Living Building on the West Coast and the world’s fourth fully-certified Living Building.
| Apr 15, 2013
Advanced lighting controls and exterior tactics for better illumination - AIA/CES course
To achieve the goals of sustainability and high performance, stakeholders in new construction and renovation projects must rein in energy consumption, including lighting. This course presents detailed information about lighting control strategies that contribute to energy efficient buildings and occupant well-being, as well as tips for lighting building exteriors effectively and efficiently.
| Apr 15, 2013
eBay, Microsoft, Walt Disney World among keynote speakers for 2013 SMPS Conference, July 31 – August 2 in Orlando
The Society for Marketing Professional Services (SMPS) is pleased to announce the keynote speakers for ?Build Business: Dream Big!,? its 2013 conference to be held July 31 – August 2 at the Walt Disney World® Swan and Dolphin in Orlando.
| Apr 15, 2013
Using software and the power of the cloud to connect your back office to your field operations [webinar]
This webinar will focus on a new software subscription service that will help construction companies, general and specialty contractors connect their back office infrastructure with all of their field operations. The service will help capture, manage and report on the progress of existing construction jobs and help in the planning of new ones.