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
Healthcare Facilities | Mar 31, 2017
The cost of activating a new facility
Understanding the costs specifically related to activation is one of the keys to successfully occupying the new space you’ve worked so hard to create.
Architects | Mar 28, 2017
A restroom for everyone
Restroom access affects everyone: people with medical needs or disabilities, caretakers, transgender people, parents with children of the opposite gender, and really anyone with issues or needs around privacy.
Building Team | Mar 6, 2017
AEC firms: Your website is one of the most important things you'll build
Don’t believe it? You’d better take a look at the research.
Building Team | Mar 1, 2017
Intuitive wayfinding: An alternate approach to signage
Intuitive wayfinding is much like navigating via waypoints—moving from point to point to point.
Building Team | Feb 21, 2017
Artifacts down the street: Exploring urban archaeology
Archaeologists continually unearth artifacts in our cities. It's time to showcase them.
Building Team | Feb 2, 2017
HOK joins Well Living Lab Alliance sponsored by Delos and Mayo Clinic
The Well Living Lab studies the connection between health and the indoor environment to transform human health and well-being in places where we live, work, learn, and play.
Architects | Jan 24, 2017
Politicians use architectural renderings in bid to sell Chicago’s Thompson Center
The renderings are meant to show the potential of the site located in the heart of the Chicago Loop.
Designers | Jan 13, 2017
The mind’s eye: Five thoughts on cognitive neuroscience and designing spaces
Measuring how the human mind responds to buildings could improve design.
Building Team | Jan 11, 2017
Can design help close the nation's political divide?
Practically every building typology is evolving to meet the needs of the innovation economy. Why not legislative spaces?
Building Team | Jan 10, 2017
Fiber canopies proposed to turn Phoenix streets into comfortable public space
The proposal was the winning entry in a design competition asking for ways to strengthen the identity of the Arizona city.