Engineering and construction (E&C) deal activity in Canada rose moderately in Q4 2018, with 13 transactions that closed during the quarter compared to nine in Q3 2018. Operating metrics stayed strong despite the sector anticipating longer-term macroeconomic headwinds. While activity levels were healthy, there were no major transactions in Q4. In fact, Canadian transactions this quarter only involved private vendors. Five deals involved Canadian public company buyers, while only one of the buyers was international.
As equity capital markets strengthen in Q1 2019, we anticipate robust E&C deal activity to continue throughout the year.
“Canadian E&C sector M&A activity levels were somewhat stronger than global results in Q4 2018, although aggregate deal value remains relatively low. Global macroeconomic factors continue to cast a long shadow over the Canadian M&A market.”
Deal value in 2018 was $94.0 billion, a significant decline of 21% over 2017. However, the deal value in Q4 with $26.2 billion increased by 12% vis-à-vis previous quarter buoyed by two material transactions announced in Q4, including Hitachi’s acquisition of ABB’s Power System Division.
Average deal size in 2018 was $113.1 million, a slight decrease versus FY 2017 of only 7% (compared to a decline in deal volume for deals with disclosed deal value of 14%) reflecting strong valuation levels and deal size. In Q4 2018, the average deal size was $134.4 million, second only to Q4 2017.
At the regional level, 55% of deal value was driven by Asia and Oceania acquirers, and 67% of deal value was driven by strategic investors—both weighted by the Hitachi acquisition noted previously, as well as WorleyParson’s acquisition of Jacob’s Energy & Chemicals business announced in October.
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