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
Modular Building | Jan 19, 2024
Building with shipping containers not as eco-friendly as it seems
With millions of shipping containers lying empty at ports around the world, it may seem like repurposing them to construct buildings would be a clear environmental winner. The reality of building with shipping containers is complicated, though, and in many cases isn’t a net-positive for the environment, critics charge, according to a report by NPR's Chloe Veltman.
Engineers | Jan 18, 2024
Walter P Moore promotes former 40 Under 40 winner Kelly Roberts
In addition to her role as a Principal, Roberts is a distinguished leader in structural design with an extensive portfolio encompassing diverse projects such as educational and healthcare facilities to commercial and healthcare structures.
Sponsored | BD+C University Course | Jan 17, 2024
Waterproofing deep foundations for new construction
This continuing education course, by Walter P Moore's Amos Chan, P.E., BECxP, CxA+BE, covers design considerations for below-grade waterproofing for new construction, the types of below-grade systems available, and specific concerns associated with waterproofing deep foundations.
Sponsored | Performing Arts Centers | Jan 17, 2024
Performance-based facilities for performing arts boost the bottom line
A look at design trends for “budget-wise” performing arts facilities reveals ways in which well-planned and well-built facilities help performers and audiences get the most out of the arts. This continuing education course is worth 1.0 AIA learning unit.
Giants 400 | Jan 15, 2024
Top 80 Hospital Facility Engineering Firms for 2023
Jacobs, WSP, BR+A, IMEG, and AECOM head BD+C's ranking of the nation's largest hospital facility engineering and engineering/architecture (EA) firms for 2023, as reported in the 2023 Giants 400 Report.
Airports | Jan 15, 2024
How to keep airports functional during construction
Gensler's aviation experts share new ideas about how to make the airport construction process better moving forward.
Concrete | Jan 12, 2024
Sustainable concrete reduces carbon emissions by at least 30%
Designed by Holcim, a building materials supplier, ECOPact offers a sustainable concrete alternative that not only meets, but exceeds the properties of standard concrete.
Adaptive Reuse | Jan 12, 2024
Office-to-residential conversions put pressure on curbside management and parking
With many office and commercial buildings being converted to residential use, two important issues—curbside management and parking—are sometimes not given their due attention. Cities need to assess how vehicle storage, bike and bus lanes, and drop-off zones in front of buildings may need to change because of office-to-residential conversions.
MFPRO+ News | Jan 12, 2024
As demand rises for EV chargers at multifamily housing properties, options and incentives multiply
As electric vehicle sales continue to increase, more renters are looking for apartments that offer charging options.
Student Housing | Jan 12, 2024
UC Berkeley uses shipping containers to block protestors of student housing project
The University of California at Berkeley took the drastic step of erecting a wall of shipping containers to keep protestors out of a site of a planned student housing complex. The $312 million project would provide badly needed housing at the site of People’s Park.