Mega deals drive increased deal value
Participation among financial investors reaches five-year high
NEW YORK, February 13, 2014 – Merger and acquisition (M&A) deal volume and value in the global industrial products (IP) industry rose significantly on a sequential basis during the fourth quarter of 2013, according to a series of quarterly M&A reports released today by PwC US. The increase included a notable gain in mega deals (transactions worth more than $1 billion) compared with the third quarter of 2013, which helped drive total deal value across several IP sectors. In addition, financial investors increased their participation across the majority of M&A market sectors, contributing 36.4 percent to total deal volume in the fourth quarter, the highest in five years. PwC’s IP practice examined deal activity in the fourth quarter of 2013 across six sectors: aerospace & defense (A&D), chemicals, engineering & construction, industrial manufacturing, metals and transportation & logistics.
“We witnessed a notable uptick in the overall M&A environment across the global industrial products industry during the fourth quarter, as worldwide business sentiment continued to improve,” said Robert McCutcheon, U.S. industrial products leader, PwC. “Despite a recent rise in volatility stemming from instability in several emerging markets and a potential slowdown in China, we may see a positive deal momentum to continue in 2014. As the overall global economic recovery continues to take hold and more established markets transition from stabilization to growth, strategic and financial investors in the IP space will likely look to pursue inorganic opportunities to expand their footprints, fuel innovation and integrate technological know-how to better position their assets for the future.”
Across the entire IP industry, there were 216 transactions worth $50 million or more, totaling $83.6 billion in the fourth quarter of 2013, compared to 181 deals and $65.3 billion in total value during the previous quarter. Transportation & logistics M&A activity in the fourth quarter was a significant driver of deal volume and value among the IP sectors, representing 66 transactions worth $50 million or more totaling $23.2 billion, compared to 42 deals worth $10.7 billion in the third quarter of 2013. For the full year of 2013, there were 726 transactions worth $50 million or more, totaling $257.8 billion, down from 836 deals and $353.3 billion in total value during 2012.
There was a sequential increase in mega deals across several IP sectors during the fourth quarter of 2013, with a total of 20 mega deals worth $38.1 billion in the fourth quarter of 2013. The chemicals industry accounted for six mega deals valued at $10.7 billion in the fourth quarter of 2013, compared to only one mega deal worth $1.3 billion in the third quarter. The metals sector also saw a substantial spike in mega deals, with five mega transactions valued at $12 billion during the fourth quarter, compared to one mega deal worth $1.3 billion in the third quarter.
Strategic investors continued to drive the majority of deal activity across the IP industry during the fourth quarter and full year, reflecting their focus on longer-term investment initiatives. Participation among financial acquirers increased sequentially in five of six sectors during the fourth quarter. For the full year, participation among financial investors across all sectors rose to 31.4 percent, up from 27.8 percent for all of 2012. The transportation & logistics industry led the way with financial investors representing 54.5 percent of fourth quarter M&A volume.
“Financial investors are re-entering the M&A market in the IP industry, reflecting improved sentiment and moderation in perceived risk, particularly in more established global markets. They are tapping into their strong cash positions that are available from recent IPOs and other exits of their investments such that they are able to redeploy their capital into new industrial companies. That interest should continue in the year ahead, given cash on-hand, ample liquidity and the availability of low-cost debt financing,” said McCutcheon.
Local deals continued to drive M&A activity in the fourth quarter with Asia and Oceana being most active, recording 85 deals worth more than $50 million with a total value of $25.9 billion compared to 60 local deals and a total value of $14.5 billion in the previous quarter. However, there was also an uptick in North American local deal activity in the fourth quarter of 2013 with 50 deals worth $50 million or more totaling $19.5 billion, up from 39 deals with a total value of $11.1billion from the third quarter.
“We are continuing to see a moderately improved climate in the U.S. for deal making given the increasing attractiveness of the domestic manufacturing sector. This trend is in line with the results of our most recent Manufacturing Barometer survey, which showed sequential and year-over-year gains in sentiment among U.S. industrial manufacturers regarding the prospects of the domestic economy,” said McCutcheon. “Our Barometer also pointed out that the expansion into new markets abroad increased citing plans for new facilities abroad. We expect this to be a continued trend among IP companies for the longer term.”
PwC’s IP M&A analysis is a quarterly report of announced U.S. transactions with value greater than $50 million analyzed by PwC using transaction data from Thomson Reuters.
For more information on PwC’s Deals practice, visit www.pwc.com/us/deals.
About PwC’s Industrial Products practice
PwC’s Industrial Products (IP) practice provides financial, operational, and strategic services to global organizations across the aerospace & defense (A&D), business services, chemicals, engineering & construction (E&C), forest, paper, & packaging (FPP), industrial manufacturing, metals, and transportation & logistics (T&L) industries. With more than 31,000 professionals located in over 150 countries, PwC’s IP global professionals deliver a wide range of industry-focused tax, assurance, and advisory services to address critical business issues. For more information please visit: www.pwc.com/us/en/industrial-products
About PwC US
PwC US helps organizations and individuals create the value they're looking for. We're a member of the PwC network of firms in 157 countries with more than 184,000 people. We're committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/US. Gain customized access to our insights by downloading our thought leadership app: PwC's 365™ Advancing business thinking every day
© 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC US refers to the US member firm, and PwC may refer to either the PwC network of firms or the US member firm. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
# # #