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
| Feb 23, 2011
Green building on the chopping block in House spending measure
Bryan Howard, Legislative Director of the U.S. Green Building Council, blogs about proposed GOP budget cuts that could impact green building in the commercial sector.
| Feb 22, 2011
LEED Volume Program celebrates its 500th certified Pilot Project
More than 500 building projects have certified through the LEED Volume Program since the pilot launched in 2006, according to the U.S. Green Building Council. The LEED Volume Program streamlines the certification process for high-volume property owners and managers, from commercial real estate firms, national retailers and hospitality providers, to local, state and federal governments.
| Feb 14, 2011
Sustainable Roofing: A Whole-Building Approach
According to sustainability experts, the first step toward designing an energy-efficient roofing system is to see roof materials and systems as an integral component of the enclosure and the building as a whole. Earn 1.0 AIA/CES learning units by studying this article and successfully completing the online exam.
| Feb 11, 2011
Four Products That Stand Up to Hurricanes
What do a panelized wall system, a newly developed roof hatch, spray polyurethane foam, and a custom-made curtain wall have in common? They’ve been extensively researched and tested for their ability to take abuse from the likes of Hurricane Katrina.
| Feb 11, 2011
RS Means Cost Comparison Chart: Office Buildings
This month's RS Means Cost Comparison Chart focuses on office building construction.
| Feb 11, 2011
Sustainable features on the bill for dual-building performing arts center at Soka University of America
The $73 million Soka University of America’s new performing arts center and academic complex recently opened on the school’s Aliso Viejo, Calif., campus. McCarthy Building Companies and Zimmer Gunsul Frasca Architects collaborated on the two-building project. One is a three-story, 47,836-sf facility with a grand reception lobby, a 1,200-seat auditorium, and supports spaces. The other is a four-story, 48,974-sf facility with 11 classrooms, 29 faculty offices, a 150-seat black box theater, rehearsal/dance studio, and support spaces. The project, which has a green roof, solar panels, operable windows, and sun-shading devices, is going for LEED Silver.
| Feb 11, 2011
BIM-enabled Texas church complex can broadcast services in high-def
After two years of design and construction, members of the Gateway Church in Southland, Texas, were able to attend services in their new 4,000-seat facility in late 2010. Located on a 180-acre site, the 205,000-sf complex has six auditoriums, including a massive 200,000-sf Worship Center, complete with catwalks, top-end audio and video system, and high-definition broadcast capabilities. BIM played a significant role in the building’s design and construction. Balfour Beatty Construction and Beck Architecture formed the nucleus of the Building Team.
