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
Sponsored | Fire and Life Safety | Jul 12, 2023
Fire safety considerations for cantilevered buildings [AIA course]
Bold cantilevered designs are prevalent today, as developers and architects strive to maximize space, views, and natural light in buildings. Cantilevered structures, however, present a host of challenges for building teams, according to José R. Rivera, PE, Associate Principal and Director of Plumbing and Fire Protection with Lilker.
Building Owners | Jul 12, 2023
Building movement: When is it a problem?
As buildings age, their structural conditions can deteriorate, causing damage and safety concerns. In order to mitigate this, it’s important to engage in the regular inspection and condition assessment of buildings for diagnosis.
Mass Timber | Jul 11, 2023
5 solutions to acoustic issues in mass timber buildings
For all its advantages, mass timber also has a less-heralded quality: its acoustic challenges. Exposed wood ceilings and floors have led to issues with excessive noise. Mass timber experts offer practical solutions to the top five acoustic issues in mass timber buildings.
Multifamily Housing | Jul 11, 2023
Converting downtown office into multifamily residential: Let’s stop and think about this
Is the office-to-residential conversion really what’s best for our downtowns from a cultural, urban, economic perspective? Or is this silver bullet really a poison pill?
Adaptive Reuse | Jul 10, 2023
California updates building code for adaptive reuse of office, retail structures for housing
The California Building Standards Commission recently voted to make it easier to convert commercial properties to residential use. The commission adopted provisions of the International Existing Building Code (IEBC) that allow developers more flexibility for adaptive reuse of retail and office structures.
Laboratories | Jul 10, 2023
U.S. Department of Agriculture opens nation’s first biosafety level 4 containment facility for animal disease research
Replacing a seven-decade-old animal disease center, the National Bio and Agro-Defense Facility includes the nation’s first facility with biosafety containment capable of housing large livestock.
Adaptive Reuse | Jul 6, 2023
The responsibility of adapting historic university buildings
Shepley Bulfinch's David Whitehill, AIA, believes the adaptive reuse of historic university buildings is not a matter of sentimentality but of practicality, progress, and preservation.
Market Data | Jul 5, 2023
Nonresidential construction spending decreased in May, its first drop in nearly a year
National nonresidential construction spending decreased 0.2% in May, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.
Architects | Jul 5, 2023
Niles Bolton Associates promotes Jeffrey Smith, AIA, to President and C. Cannon Reynolds, AIA, to Managing Director
Niles Bolton Associates (NBA), a leading architecture, planning and design firm, announces leadership changes as a part of its ongoing commitment to future growth. Current Executive Vice President, Jeffrey Smith, AIA, has been named President and C. Cannon Reynolds, AIA, has been named Managing Director effective June 30, 2023.
Mixed-Use | Jun 29, 2023
Massive work-live-play development opens in LA's new Cumulus District
VOX at Cumulus, a 14-acre work-live-play development in Los Angeles, offers 910 housing units and 100,000 sf of retail space anchored by a Whole Foods outlet. VOX, one of the largest mixed-use communities to open in the Los Angeles area, features apartments and townhomes with more than one dozen floorplans.
