13/8/10 – Mergers and Acquisitions up for Global Industrial Manufacturing Sector
13 August 2010
According to PricewaterhouseCoopers deal volume in the second quarter has doubled in the global industrial manufacturing industry showed marked improvement from the first quarter of 2010. PricewaterhouseCoopers LLP report, Assembling value: Second-quarter 2010 global industrial manufacturing mergers and acquisitions analysis says that in the second quarter of 2010, there were 33 announced deals worth $50 million or more, which is more than double the 14 deals announced in Q1 2010.
Deal value totalled US $8.5 billion in Q2, more than triple the $2.3 billion in value announced in Q1 2010. Additionally, both deal volume and value also saw an increase in a year-over-year basis, up from 12 deals with a total value of $3.2 billion in Q2 2009.
The company notes that that as global economic trends continue to improve, this activity is being driven by smaller deals and transactions with undisclosed values, which stays on par with historical trends. However, middle-market, large and mega-deal activity continues to increase and the near-term outlook points to sustained growth. Showcasing this trend are the two mega-deals (transactions of $1 billion or more) in Q2 2010, compared to Q1 2010 when no mega-deals were announced and the entirety of 2009 when only one mega-deal was announced.
"Looking ahead, we expect the deal environment will continue to improve as credit access eases, equity markets advance and economic growth rates stabilize. However, although many factors have improved, others remain weak, such as stubbornly high levels of unemployment and weak residential construction activity," said Barry Misthal, U.S. industrial manufacturing leader, PricewaterhouseCoopers. "Nevertheless, we believe that buyers are becoming increasingly optimistic in their near-term economic outlooks."
Because industrial manufacturing industry has been hit hard by the recession, PriceWaterhouseCoopers says that opportunities to acquire undervalued assets abound. However, organizations focused on outpacing their competitors through acquisitions can lose sight of the deal’s objectives during the often difficult integration phase.
Closing deals is tough, but capturing deal value is even tougher, according to the report. In some ways, deciding whether to go forward with a merger or acquisition is the easy part, and the act of "owning" after the transaction is complete is the real challenge. In the end, the market will reward or punish shareholders of the combined company depending on how well its management succeeds at achieving stated deal objectives. For this reason, it is imperative that synergies are realized, deal value is captured, and the resulting performance is communicated to all those with a stake in the outcome says the company.