PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.
Despite progress on combatting the pandemic, indicators of improving economic activity, declining unemployment and an economy that will likely be largely reopened by midyear, engineering and construction deal volume and value declined slightly in the first quarter of 2021, driven by lower activity within the construction and home building segments. However, while deal volumes declined compared to the fourth quarter of 2020, activity levels in the first half of 2021 were in line with pre-pandemic levels. The decline in deal value in the first quarter of 2021 was driven by fewer billion-dollar-plus deals than in the fourth quarter of 2020.
While deal volumes returned to pre-pandemic levels, there was a shift in the first quarter of 2021 from cross-border, emerging-economy to local advanced-economy transactions.
Despite robust pipelines, the infrastructure segment continues to face challenges, with global supply-chain disruptions, rising materials and equipment input costs and labor shortages contributing to project delays and increasing pressure on already tight margins.
However, with the potential for large-scale infrastructure spending on the horizon and a continued favorable interest-rate outlook, deal activity can be expected to continue growing for the remainder of 2021. Companies are expected to place an emphasis on restructuring investments with a focus on technology and optimization as they target operational efficiencies, cost savings, labor gaps and alternate service delivery approaches.
“As economies recover from the pandemic faster than anticipated, commodity and labor pricing pressures will continue to drive the search for innovative methods and disruptive technologies to protect margins.”