19/8/10 – Engineering and Construction M&A Deal Activity Continues to Rebound in Q2 2010, says PricewaterhouseCoopers
19 August 10
Total deal value has reached $11.8 Billion in Q2 2010 in the global engineering and construction (E&C) sector according to the PricewaterhouseCoopers LLP report, Engineering growth: Second-quarter 2010 global engineering and construction industry mergers and acquisitions analysis.
The reports says that the near-term outlook remains favorable for continued growth, as the first half of 2010 has seen 30 more deals than the first half of 2009, largely as a result of a weak Q1 2009. Meanwhile, deal volume increased from 34 in Q1 2010 to 44 in Q2 2010. In terms of value, deals totaled $11.8 billion in the second quarter of 2010, compared with $22.5 billion and $10.4 billion in the first quarter of 2010 and second quarter of 2009, respectively.
"Though deal value trended downward in Q2, our near term outlook for the industry is optimistic, as we expect overall deal activity to build momentum in the months ahead," said Kent Goetjen, U.S. engineering and construction industry leader at PricewaterhouseCoopers. "The first half of 2010 ended strong, and we think that as the global economy improves and risk aversion moderates, these factors will help drive a strong recovery in deal activity within this sector."
PriceWaterhouseCoopers notes that while the two mega-deal transactions (deals with a disclosed value of at least $1 billion) announced in Q2 2010 represents a noticeable decline from the four mega-deals reported in Q1 2010, mega-deal value as a whole in the first half of 2010 has already surpassed 2009. A reduction of capital constraints is seen as the major reason for this year-over-year increase in deal value.
Meanwhile, financial investors continue to spur M&A activity, says the company although at a much lesser degree than strategic investors. During the second quarter of 2010, strategic investor contribution drove nearly two-thirds of deal volume.
From a regional perspective, targets located in the Asia and Oceania regions were the primary drivers of deal activity in Q2 2010, accounting for 48 percent of transactions valued at $50 million or more. Meanwhile, North America transactions declined significantly from 24 percent in Q1 2010 to 11 percent in Q2 2010.
The level of activity affiliated with BRIC countries (Brazil, Russia, India and China) also grew in Q2 2010, with China being the primary driver. Of the 19 deals announced for BRIC targets, 11 were in China. Similarly, of the 15 deals announced by BRIC acquirers, 11 were China-based companies.