Although the Engineering & Construction industry had a slow start with M&A activity during the first quarter of 2017, there was an upswing in deal value during the last three quarters for the year as companies shifted focus away from uncertainty to opportunity anchored by a strong global economy and housing market, as well as continued infrastructure demands.
In 2017, the E&C sector had 2,598 deals with a total value of $93 billion globally, down 3% in volume and 9% in value compared to 2016. However, 2017 should be viewed as an overall favorable year as momentum started to build in Q2 and continued throughout the year; setting aside Q1 in both years deal value in Q2 – Q417 was up almost $0.9 billion versus the same period in 2016 on relatively flat deal volume. This trend is reflective of higher average deal value of $102 million in 2017 – slightly up from 2016 – which can be attributed to the increasing size of deals, particularly in the last three quarters of 2017 versus 2016, and complexity of construction projects and the increasing need to provide technical expertise. Deal volume remains strongest in the Construction category with 879 transactions in 2017.
Strategic investors continue to lead in contributing to the majority share of deal activity – 69% in value and 65% in volume. We’re also seeing an uptick in activity from financial investors, indicating an increase in interest from private equity due to higher expected returns and the improved sentiment of national investments in construction activities.
The Asia and Oceania region remains the most active in deal activity and also contributed to the majority of deal value in the sector with 936 deals and a total value of $34 billion in 2017. This activity was driven by China’s plan to revive manufacturing and infrastructure, which led to consolidation efforts for local companies. North America continued an upward trend from 2016 and followed the Asia and Oceania regions with $32 billon in deal value. The European region finished at $25 billion and more impressively up $7 billion from 2016, reflecting increasing confidence in the market.
The E&C sector is well positioned for a strong 2018 M&A environment, fueled by increasing demand for both domestic and cross-border new market opportunities, combined with existing housing and infrastructure demands globally. The US specifically could experience favorable upside to existing positive trends in 2018 as the full impact of tax reform solidifies and if the long-debated US infrastructure spending bill comes to fruition.
View the full year-end global E&C deals report here.