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 12, 2011
Mental hospital in Boston redeveloped as healthcare complex
An abandoned state mental health facility in Boston’s prestigious Longwood Medical Area is being transformed into the Mass Mental Health Center, a four-building mixed-use complex that includes a mental health day hospital, a clinical and office building, a medical research facility for Brigham and Women’s Hospital, and a residential facility.
| Apr 12, 2011
Miami courthouse design does justice to children and the environment
Suffolk Construction broke ground recently for the Miami-Dade County Children’s Courthouse, a $328 million project the firm has a 30-month contract to complete.
| Apr 12, 2011
Long-awaited San Francisco center is music to jazz organization’s ears
After 28 years, SFJAZZ is getting its first permanent home. The San Francisco-based nonprofit, which is dedicated to advancing the art of jazz through concerts and educational programs, contracted local design firm Mark Cavagnero Associates and general contractor Hathaway Dinwiddie to create a modern performance center in the city’s Hayes Valley neighborhood
| Apr 12, 2011
Entrance pavilion adds subtle style to Natural History Museum of Los Angeles
A $13 million gift from the Otis Booth Foundation is funding a new entrance pavilion at the Natural History Museum of Los Angeles County. CO Architects, Los Angeles, is designing the frameless structure with an energy-efficient curtain wall, vertical suspension rods, and horizontal knife plates to make it as transparent as possible.
| Apr 12, 2011
BIM Grows Up: Separating Hype from Reality in a 3D World
While BIM adoption still lags in both design and construction, some enterprising owners, architects, and contractors are unlocking the potential of this dynamic technology.
| Apr 12, 2011
Metal cladding: Enhancing design with single-skin panels, MCMs, and IMPs
Single-skin metal panels, metal composite panels, and insulated metal panels can add both aesthetic and functional value to your projects, if you use them correctly.
| Apr 12, 2011
American Institute of Architects announces Guide for Sustainable Projects
AIA Guide for Sustainable Projects to provide design and construction industries with roadmap for working on sustainable projects.
| Apr 11, 2011
Wind turbines to generate power for new UNT football stadium
The University of North Texas has received a $2 million grant from the State Energy Conservation Office to install three wind turbines that will feed the electrical grid and provide power to UNT’s new football stadium.
| Apr 8, 2011
SHW Group appoints Marjorie K. Simmons as CEO
Chairman of the Board Marjorie K. Simmons assumes CEO position, making SHW Group the only firm in the AIA Large Firm Roundtable to appoint a woman to this leadership position
| Apr 5, 2011
Zaha Hadid’s civic center design divides California city
Architect Zaha Hadid is in high demand these days, designing projects in Hong Kong, Milan, and Seoul, not to mention the London Aquatics Center, the swimming arena for the 2012 Olympics. But one of the firm’s smaller clients, the city of Elk Grove, Calif., recently conjured far different kinds of aquatic life when members of the City Council and the public chose words like “squid,” “octopus,” and “starfish” to describe the latest renderings for a proposed civic center.