PwC's latest quarterly analysis reported that the worldwide engineering and construction industries closed 218 merger and acquisition deals in 2014 worth more than $172 billion. The numbers are more than three times greater than 2013's total of $55 billion. Last year was the busiest year for M&A activity since 2007.
There were four mega deals in the fourth quarter of 2014, including one valued at $35 billion. Overall, there were 21 mega deals last year, totaling $127 billion. The greatest number of deals took place in Asia and Oceania.
“Some of the significant year-over-year growth in M&A activity can be attributed to companies seeking to better position themselves for mega projects that not only require a longer commitment of time and capital, but also deeper pools of highly skilled talent,” said H. Kent Goetjen, U.S. engineering and construction leader at PwC. “The lack of available talent, which is being fueled in the U.S. by the retirement of the baby boomer generation, is driving up the price of acquisitions and will continue to do so for the foreseeable future.”
PwC analysts are monitoring several other trends that are expected to affect the values and locations of deals in the engineering and construction sector, including:
• The integration of design and consultancy firms with construction companies is well under way as the E&C industry continues to move toward full service integration. Firms are generally looking to leverage higher-value added services, such as design, while balancing out their regional exposure.
• A major driver of consolidation is talent needs, as companies compete for specialized technical expertise in high-demand segments. As an alternative to acquiring expertise, some companies are embarking upon joint ventures, but these are complicated and add significant operational risk to any project. Companies are positioning themselves to bid on larger, increasingly complex projects with new partners and non-traditional sources of funding.
• A flurry of smaller, local deals took place, particularly within Asia. Cross-border activity dropped to 22% of the total in the quarter, with most local activity occurring in Asia.
• Cement oversupply and tepid demand continue to plague the industry. Top players, in an attempt to maintain their market share and margin, continue to acquire smaller companies post-merger announcement of Holcim and Lafarge.
• The consolidation in Asia was not limited to the construction materials segment, and not all driven by overcapacity, as all segments of E&C experienced a pick-up in local consolidation. The uncertain economic outlook in China raises many concerns for inbound activity in Asia but does not seem to be hindering deal activity in the region.
Related Stories
| Jun 11, 2018
Accelerate Live! talk: AEC data hunter - How a Fortune 500 data guru is transforming a construction giant
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), data expert Catherine Rose shares how data-driven decision making is transforming construction operations and business operations at Skanska USA.
Libraries | Jun 1, 2018
New library offers a one-stop shop for what society is craving: hands-on learning
Beyond lending books and DVDs, the Elkridge (Md.) branch library loans household tools like ladders, wheelbarrows, and sewing machines.
| May 30, 2018
Accelerate Live! talk: Seven technologies that restore glory to the master builder
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), AEC technophile Rohit Arora outlines emerging innovations that are poised to transform how we design and build structures in the near future.
| May 30, 2018
Accelerate Live! talk: Why the AEC industry must adapt to the Internet of Things boom
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), building systems expert Jeff Carpenter explores established and emerging IoT applications for commercial and institutional buildings, and offers a technology roadmap for navigating the IoT landscape.
| May 30, 2018
Accelerate Live! talk: T3 mass timber office buildings
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), architect and mass timber design expert Steve Cavanaugh tells the story behind the nation’s newest—and largest—mass timber building: T3 in Minneapolis.
| May 30, 2018
Accelerate Live! talk: From micro schools to tiny houses: What’s driving the downsizing economy?
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), micro-buildings design expert Aeron Hodges, AIA, explores the key drivers of the micro-buildings movement, and how the trend is spreading into a wide variety of building typologies.
Market Data | May 29, 2018
America’s fastest-growing cities: San Antonio, Phoenix lead population growth
San Antonio added 24,208 people between July 2016 and July 2017, according to U.S. Census Bureau data.
| May 24, 2018
Accelerate Live! talk: The rise of multi-user virtual reality
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), two of CannonDesign's tech leaders present their early findings from pilot testing multi-user VR technology for AEC project coordination.
| May 24, 2018
Accelerate Live! talk: The next frontier of post-occupancy evaluations
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), ZGF Architects’ Chris Chatto outlines methods for conducting meaningful, holistic evaluations from design to occupancy.
| May 24, 2018
Accelerate Live! talk: Security and the built environment: Insights from an embassy designer
In this 15-minute talk at BD+C’s Accelerate Live! conference (May 10, 2018, Chicago), embassy designer Tom Jacobs explores ways that provide the needed protection while keeping intact the representational and inspirational qualities of a design.
