Global industrial manufacturing deals insights: Q3 2019

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Executive summary

Worldwide cross-sector deal value decreased 13% from YTD 2018 to YTD 2019, while deal volume remained flat at a 1% increase during the same period. Consistent with cross-sector worldwide, Industrial Manufacturing value has decreased 16% from YTD 2018 to YTD 2019. The primary driver of value decline is related to the 11% decrease in deal volume during this period, which is reflective of some of the lowest quarterly activity since Q1 2014. Consistent with the trend noted in our Q2 2019 publication, year-to-date activity has been driven by scale transactions, which are primarily focused on product, customer, and geographic expansion. The decrease in deal volume is a result of macroeconomic factors such as the lingering trade war, anemic GDP growth around the world, and high valuations. While overall deal value has seen a decline, the aggregate value of the top ten deals year-to-date has remained stable at $30.3 billion YTD 2018 and $31.4 billion YTD 2019. As such, these macroeconomic factors have not deterred deal makers from turning to M&A to meet their strategic objectives.

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“2019 industrial manufacturing M&A has been dominated by scale transactions, which is a trend we will continue to see in the fourth quarter and into 2020.”

Paul Elie, US Industrial Manufacturing Deals Leader

Trends and highlights

  • In Q3 2019, the total deal value declined by 32% to $18.1 billion when compared to Q2 2019. For YTD 2019, the deal value also declined by 16% to $64.5 billion vis-à-vis YTD 2018.
  • Similar trend can be seen in terms of total deal volume. Deal volume in Q3 2019 and YTD 2019 declined by 10% and 11% over Q2 2019 and YTD 2018, respectively.
  • Average deal size declined by 15% to $83.6 million in Q3 2019 compared to Q2 2019. The average deal size also declined by a mere 2% to $93.7 million in YTD 2019 vs. YTD 2018.
  • Out of the top ten deals in YTD 2019, four deals took place in Q3 2019. These four totaled up to ~$9.3 billion, and accounted for more than 50% of the total deal value for the quarter.
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Highlights of deal activity

industrial-manufacturing-deals-activity-overview
industrial-manufacturing-deals-activity-chart

Key announced transactions (YTD 2019)

Announced

Target name

Target nation

Acquirer name

Acquirer nation

Status

Deal value*

Category

04/30/19

Ingersoll-Rand US Holdco Inc.

United States

Gardner Denver Holdings Inc.

United States

Pending

8,736

Industrial Machinery

01/31/19

RPC Group PLC

United Kingdom

Berry Global International Holdings Ltd.

United Kingdom

Completed

6,244

Rubber and Plastic Products

07/15/19

OSRAM Licht AG

Germany

Multiple

Germany

Pending

3,972

Electronic and Electrical Equipment

02/25/19

IFCO SYSTEMS GmbH

Germany

Investor Group

United Kingdom

Completed

2,510

Rubber and Plastic Products

07/01/19

Kokusai Electric Corp.

Japan

Applied Materials Inc.

United States

Pending

2,200

Industrial Machinery

07/12/19

Milacron Holdings Corp.

United States

Hillenbrand Inc.

United States

Pending

2,016

Industrial Machinery

05/16/19

Howden Group Ltd.

United Kingdom

KPS Capital Partners LP

United States

Pending

1,800

Industrial Machinery

02/11/19

Accudyne Industries LLC-Precision Flow Systems Management Business

United States

Ingersoll-Rand PLC

Ireland-Rep

Completed

1,450

Fabricated Metal Products

04/24/19

JR Automation Technologies LLC

United States

Hitachi Ltd.

Japan

Pending

1,425

Industrial Machinery

07/31/19

Infiltrator Water Technologies LLC

United States

Advanced Drainage Systems Inc.

United States

Completed

1,080

Rubber and Plastic Products

Source: Thomson Reuters and other publicly available sources. *In Million USD


Industrial manufacturing deals outlook

While disruptive factors are prevailing and point to an economic downturn, many of the positive factors we have highlighted in our previous publications are still relevant in Q3 2019. As stated in PwC’s publication “Winning through M&A in the next recession,” the M&A environment is cyclical and has historically followed economic downturns, as capital available for deals typically decreases; however, the next recession will be different. We believe the downturn will be unlike historical downturns as disruptive economic factors are partially offset by a few positive factors, leading buyers to continue to pursue M&A activity.

Positive factors impacting the deal-making landscape in 2019:

  • Record levels of dry powder from private equity funds and healthy corporate balance sheets coupled with the repatriation of cash for US-based multinationals indicate sufficient levels of capital to pursue acquisitions, which will prevent deal activity from dropping too low.
  • High valuations have been a factor for the decline in deal volume from YTD 2018 to YTD 2019. However, as the economic outlook declines, valuations will likely fall, which will provide opportunities for buyers with high levels of capital. If buyers are aggressive during the downturn, M&A demand should be higher than historical downturns.
  • The prominence of megadeals is reflecting a decoupling of the megadeals segment of the M&A market from the lower-growth global economic environment.

Disruptive factors likely to create a pause in deal making in 2019:

  • The Chinese and US economies are pointing to economic slowdowns. Chinese GDP growth in 2019 is expected to be between 6.2%–6.4%, a decrease from approx. 6.7%–6.8% in 2018. The US GDP annualized growth in 2019 is expected to be between 1.8%–2.3%, a decrease from approx. 3%–3.5% in 2018.
  • Uncertainties as it relates to length of economic slowdowns around the globe, Brexit, and the continued struggles to negotiate trade agreements and tariff concessions between the US and China, remain on the minds of deal makers.
  • The PMI index has dropped to 47.8 at the end of Q3 2019, which is the lowest it has been since 2009.

About the data

The information presented in this report is an analysis of deals in the global industrial manufacturing industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into one of 111 industrial manufacturing industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to IM or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between October 1, 2016 and September 30, 2019, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Paul Elie

Industrial Products Deals Leader, PwC US

Bobby Bono

Industrial Manufacturing Leader, PwC US

Barry Misthal

Global Industrial Manufacturing Leader, PwC Switzerland

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