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
| Nov 2, 2010
Wind Power, Windy City-style
Building-integrated wind turbines lend a futuristic look to a parking structure in Chicago’s trendy River North neighborhood. Only time will tell how much power the wind devices will generate.
| Nov 2, 2010
Energy Analysis No Longer a Luxury
Back in the halcyon days of 2006, energy analysis of building design and performance was a luxury. Sure, many forward-thinking AEC firms ran their designs through services such as Autodesk’s Green Building Studio and IES’s Virtual Environment, and some facility managers used Honeywell’s Energy Manager and other monitoring software. Today, however, knowing exactly how much energy your building will produce and use is survival of the fittest as energy costs and green design requirements demand precision.
| Nov 2, 2010
Yudelson: ‘If It Doesn’t Perform, It Can’t Be Green’
Jerry Yudelson, prolific author and veteran green building expert, challenges Building Teams to think big when it comes to controlling energy use and reducing carbon emissions in buildings.
| Nov 2, 2010
Historic changes to commercial building energy codes drive energy efficiency, emissions reductions
Revisions to the commercial section of the 2012 International Energy Conservation Code (IECC) represent the largest single-step efficiency increase in the history of the national, model energy. The changes mean that new and renovated buildings constructed in jurisdictions that follow the 2012 IECC will use 30% less energy than those built to current standards.
| Nov 1, 2010
Sustainable, mixed-income housing to revitalize community
The $41 million Arlington Grove mixed-use development in St. Louis is viewed as a major step in revitalizing the community. Developed by McCormack Baron Salazar with KAI Design & Build (architect, MEP, GC), the project will add 112 new and renovated mixed-income rental units (market rate, low-income, and public housing) totaling 162,000 sf, plus 5,000 sf of commercial/retail space.
| Nov 1, 2010
John Pearce: First thing I tell designers: Do your homework!
John Pearce, FAIA, University Architect at Duke University, Durham, N.C., tells BD+C’s Robert Cassidy about the school’s construction plans and sustainability efforts, how to land work at Duke, and why he’s proceeding with caution when it comes to BIM.
| Nov 1, 2010
Vancouver’s former Olympic Village shoots for Gold
The first tenants of the Millennium Water development in Vancouver, B.C., were Olympic athletes competing in the 2010 Winter Games. Now the former Olympic Village, located on a 17-acre brownfield site, is being transformed into a residential neighborhood targeting LEED ND Gold. The buildings are expected to consume 30-70% less energy than comparable structures.
| Oct 27, 2010
Grid-neutral education complex to serve students, community
MVE Institutional designed the Downtown Educational Complex in Oakland, Calif., to serve as an educational facility, community center, and grid-neutral green building. The 123,000-sf complex, now under construction on a 5.5-acre site in the city’s Lake Merritt neighborhood, will be built in two phases, the first expected to be completed in spring 2012 and the second in fall 2014.
| Oct 21, 2010
GSA confirms new LEED Gold requirement
The General Services Administration has increased its sustainability requirements and now mandates LEED Gold for its projects.
