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. Â
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.”
Â
Â
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
| Oct 4, 2012
2012 Reconstruction Awards Gold Winner: Wake Forest Biotech Place, Winston-Salem, N.C.
Reconstruction centered on Building 91.1, a historic (1937) five-story former machine shop, with its distinctive façade of glass blocks, many of which were damaged. The Building Team repointed, relocated, or replaced 65,869 glass blocks.
| Oct 4, 2012
2012 Reconstruction Award Platinum Winner: Building 1500, Naval Air Station Pensacola Pensacola, Fla.
The Building Team, led by local firms Caldwell Associates Architects and Greenhut Construction, had to tackle several difficult problems to make the historic building meet current Defense Department standards having to do with anti-terrorism, force protection, blast-proofing, and progressive collapse.
| Oct 4, 2012
2012 Reconstruction Awards Platinum Winner: City Hall, New York, N.Y.
New York's City Hall last received a major renovation nearly a century ago. Four years ago, a Building Team led by construction manager Hill International took on the monumental task of restoring City Hall for another couple of hundred years of active service.
| Oct 4, 2012
BD+C's 29th Annual Reconstruction Awards
Presenting 11 projects that represent the best efforts of distinguished Building Teams in historic preservation, adaptive reuse, and renovation and addition projects.
| Oct 4, 2012
Integrated security systems—replacing legacy systems
To a large degree, building security is driven by the integration of a variety of electronic security systems. The market and engineering of these systems exploded in the post-9/11 era and has shown few signs of tapering off.
| Oct 4, 2012
Gilbane publishes Fall 2012 construction industry economic report
Report outlines fluctuation in construction spending; predicts continued movement toward recovery.
| Oct 3, 2012
Fifth public comment period now open for update to USGBC's LEED Green Building Program
LEED v4 drafts and the public comment tool are now available on the newly re-launched, re-envisioned USGBC.org website.
| Oct 2, 2012
Dow Business Services Center building named 2012 “America’s Best Buildings of the Year” winner
Building constructed with air sealing and insulation products from Dow Building Solutions.
| Sep 18, 2012
MKK opens office in North Dakota
MKK is currently working on seven projects in North Dakota, including a hotel, restaurant, truck stop, office building, and apartment complex.
| Sep 13, 2012
Leo A Daly Company promotes Kraskiewicz to senior vice president
Kraskiewicz, who most recently served as chief operations officer for the Leo A Daly division, will guide brand management, business development, operations and financial performance for 18 offices worldwide.
