There are promising signs coming out of the E&C and T&L sectors, particularly the increase in large deal activity.
New York (Vocus) February 19, 2010
Both engineering and construction (E&C) and transportation and logistics (T&L) sectors finished on an upward trajectory in mergers and acquisitions (M&A) in the fourth quarter of 2009 compared to the first three quarters of the year, according to two new quarterly M&A reports released today by PricewaterhouseCoopers LLP (PwC).
In terms of number of deals, the T&L sector announced 33 deals with a total value of $48.5 billion during the fourth quarter, compared with 26 deals with a value of $8.1 billion in Q3 2009. While on a year-over-year basis, E&C sector trends remained sluggish, the difference in the number and total value of deals in the sector continued to narrow into the fourth quarter of 2009.
This quarter saw an uptick in large deal activity in E&C and T&L sectors as well. Of the seven large E&C transactions announced in 2009, four were announced in the fourth quarter, and of the seven largest T&L deals in 2009, three were announced during Q4. Though large deal activity accounted for 87 percent of total T&L deal value for the quarter, the vast majority (98.6 percent) of total transactions in the E&C sector were either small or undisclosed, consistent with historical trends for the sector.
“There are promising signs coming out of the E&C and T&L sectors, particularly the increase in large deal activity,” said Dean Simone, U.S. industrial products leader at PricewaterhouseCoopers. “We will continue to watch large deal activity closely through 2010, as traditionally the proportion of M&A activity attributable to larger deals has improved as credit markets recover and rising stock markets provide strategic acquirers with the financing necessary to engage in larger deals.”
Financial investors as a group were integral in driving M&A in both sectors, comprising 39 percent of deals in Q4 in the E&C sector and picking up steam in the T&L sector as well. After strategic investors held the lead for numerous quarters, the T&L sector saw their involvement drop to less than half in the fourth quarter, with interest from financial investors increasing to 54 percent of deal volume.
From a regional perspective, U.S. companies continued to dominate the vast majority of overall deal value in 2009 for the T&L sector. T&L targets located in North America accounted for 79 percent of deal value, while acquirers in North America accounted for 86 percent of deal value in the fourth quarter. In the E&C sector, due to the announcement of several large transactions (transactions with a value of at least $1 billion) in non-U.S. markets during Q4 2009, 90 percent of deal value was attributable to transactions that did not involve a U.S.-based entity versus 78 percent in all of 2009 and 85 percent in 2008. Additionally, among BRIC (Brazil, Russia, India, and China) economies, China continued to be a hotbed of deal activity in the E&C sector, as both a target and acquirer location.
The fourth quarter editions of PricewaterhouseCoopers’ M&A reports also took an in-depth look at innovation and its potential for accelerating the economic recovery. As the economy recovers, companies hope to shrug off their "hunker down" mentality and find new ways to succeed. The question is: Which companies will be first to succeed, and how will they do it?
According to the reports, companies that will be best positioned to succeed are those that optimize their recent acquisitions and look inward to achieve the efficiencies necessary to cut and sustain costs, improve performance, and compete in an increasingly automated business environment.
Details on each subsector M&A report follow:
Engineering and Construction
The fourth quarter finished on an upward note in the engineering and construction (E&C) sector as the number and total value of deals shows signs of recovery, according to the PricewaterhouseCoopers LLP report, Engineering growth: Fourth-quarter 2009 global engineering and construction industry mergers and acquisitions analysis.
While activity still lags on a year-over-year basis, the difference continues to narrow. In terms of the number of transactions, the first, second, and third quarters of 2009 compared to the corresponding quarters of 2008 were 74 percent, 54 percent, and 19 percent lower, respectively — dropping to 13 percent in the fourth quarter. In terms of total deal value, the first, second, and third quarters of 2009 were 82 percent, 44 percent, and 34 percent lower, respectively — falling to 11 percent in the fourth quarter.
While the proportion of deals with values greater than $500 million improved during the fourth quarter, the vast majority (98.6 percent) of transactions were either small (with a value less than $500 million) or undisclosed.
Among BRIC (Brazil, Russia, India, and China) economies, China continued to be a hotbed of deal activity, as both a target and acquirer location. During the fourth quarter, nine transactions were announced by BRIC acquirers with five of these from China. Of the eight announced transactions for BRIC targets, six were in China.
Transportation and Logistics
Deal volume and deal value in the transportation and logistics (T&L) sector continued on an upward trajectory in the fourth quarter of 2009, compared to the first three quarters of the year, according to a new PricewaterhouseCoopers LLP report, Intersections: Fourth-quarter 2009 global transportation and logistics industry mergers and acquisitions analysis.
The three largest deals in 2009 were announced during the fourth quarter, accounting for 87 percent of total deal value in the quarter. The increase of large deal activity also resulted in an improvement in average deal value for the quarter. The average value of deals announced during the fourth quarter was $1.5 billion, compared to $308 million for the third quarter of 2009.
After taking the lead for numerous quarters, the involvement of strategic investors in the fourth quarter dropped to less than half, accounting for only 45 percent of deal activity. Accordingly, interest from financial investors picked up steam, accounting for 54 percent of deal volume. Regionally, while global deal activity continues on an upward trajectory in Q4, Asia & Oceania and North America continued to dominate deal activity and value.
For more information and to access the reports, visit: http://www.pwc.com/us/industrialproducts
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