Transportation & Logistics, Aerospace & Defense Deal Activity Show Improvement, Engineering & Construction Remain Flat in Third Quarter 2009, Finds PricewaterhouseCoopers
NEW YORK, Nov. 17 /PRNewswire/ — The pace of deals valued more than $50 million saw signs of improvement on a quarter-to-quarter basis, according to a series of quarterly M&A reports released today by PricewaterhouseCoopers LLP (PwC). The transportation and logistics (T&L) sector was a bright spot in Q3, with a clear upward trajectory in both deal volume and deal value compared to the first half of the year. The aerospace and defense (A&D) sector had six deals announced over the $50 million mark in the third quarter of 2009 – reflecting more deals at that value this quarter than the first two quarters of the year combined. The engineering and construction sector (E&C) had modest improvements as well, jumping from 30 deals in Q2 to 32 deals over the $50 million mark in Q3.
Large deal activity (deals valued at or over $500 million) experienced a slight upswing this quarter, particularly in the A&D, and T&L sectors. Aerospace and defense had two deals in the third quarter valued at over $500 million, and the T&L sector saw its first two large deals of the year during Q3, accounting for 38 percent of total deal value for the quarter.
Strategic investors continued to dominate deal activity across the three sectors of the industrial products industry, reflecting that financial investors are still keeping a low profile for the most part, particularly in large deal activity. Across the three industrial products segments, strategic investors accounted for approximately two-thirds of total deal activity in the third quarter. However, it is important to note that the T&L sector did experience an uptick in financial investor interest in Q3, comprising 35 percent of total deal volume, compared to just 16 percent during the first half of 2009.
The third quarter of 2009 continued the trend seen in the first half of the year, with targets located in the Asia & Oceania region accounting for a significant portion of the deal volume and value in the E&C and T&L sectors. The number of A&D deals by target region was split evenly between Asia & Oceania, North America, and Europe with approximately 27 percent in each region.
“While we remain off the pace of 2007 and 2008 activity, we are seeing some hopeful indications coming out of the third quarter that reflects modest, yet nonetheless important, improvements in large deal activity and a continued strength in the Asia & Oceania region, particularly in the engineering and construction and transportation and logistics segments,” said Dean Simone, U.S. industrial products leader at PricewaterhouseCoopers. “The outlook on deal activity will likely stay on a similar path through the rest of 2009, but pockets of optimism have surfaced, which indicates more growth promise as we move into 2010.”
The third quarter editions of PricewaterhouseCoopers’ M&A reports take a deeper look at carbon legislation and carbon monetization in the United States to explore the impact climate change policy could have on companies within the industrial products industry.
According to the reports, companies in the industrial products industry need to pay close attention to the economic consequences of proposed climate change legislation when planning and executing deal strategy. A cap & trade system will require companies to measure and account for greenhouse gas emissions and credits. These new requirements will necessitate companies to learn how to inventory carbon footprints, identify what needs to be disclosed and be able to distinguish risk from opportunity.
Details on each subsector M&A report follow:
The global recession continues to severely constrain U.S. and non-U.S. aerospace and defense (A&D) deal activity, as the total value of deals with disclosed values of at least $50 million continued to decline on a year-over-year basis for the first three quarters of 2009, according to the PricewaterhouseCoopers LLP report, Mission control: Third-quarter 2009 global aerospace and defense industry mergers and acquisitions analysis.
The annualized total number of A&D deals for 2009 is 267, representing a four percent increase over the 257 deals announced in 2008. While the number of deals is approximately flat compared to last year, the total deal value continued to decrease dramatically. The annualized value of deals for 2009 is $4.2 billion, which is a decrease of approximately 79 percent, compared with the $19.7 billion in total deal value during 2008.
The pace of deals valued at or over $50 million has steadily increased on a quarter-to-quarter basis this year. With six deals announced in Q3 at values over $50 million – two of which were over $500 million – there were more deals this quarter than the first two quarters of the year combined. The proportion of deals by financial investors continued decreasing relative to overall participation by strategic investors, with financial investors accounting for 17 percent of total deals in the third quarter.
For the first nine months of 2009, the number of deals by target region was split evenly between Asia & Oceania, North America and Europe (ex-UK and Eurozone) with approximately 27 percent in each region. However, targets in North America were dominant by value, accounting for nearly one half of acquisition targets (48 percent), suggesting that acquirers have been taking advantage of foreign currency movements, specifically the devaluation of the U.S. dollar.
Deal activity in the engineering and construction (E&C) sector remained relatively flat in the third quarter of 2009 compared to last quarter, according to the PricewaterhouseCoopers LLP report, Engineering growth: Third-quarter 2009 global engineering and construction industry mergers and acquisitions analysis.
The number of deals valued at $50 million or more improved modestly over last quarter, rising from 30 to 32 deals in Q3. In contrast, deal value this quarter decreased to approximately $9 billion from approximately $10 billion in the second quarter of 2009. Smaller transactions continued driving deal activity as evidenced by 98 percent of the 501 deals announced with disclosed values through the first three quarters of 2009 being valued at less than or equal to $500 million.
Year-to-date, large deal activity remains constrained, with three large transactions so far this year, compared with six in 2008. For the first three quarters of 2009, strategic investors accounted for 65 percent of total deal value, reflecting that financial buyers continue to remain on the sidelines.
Asia & Oceania accounted for the largest percentage of deals this quarter. Targets located in Asia & Oceania made up 46 percent of deal volume and 34 percent of deal value, while acquirers in the region accounted for 38 percent and 46 percent of deal volume and value respectively in the third quarter.
Deal volume and deal value in the transportation and logistics (T&L) sector are on an upward trajectory compared to the first half of the year, according to a new PricewaterhouseCoopers LLP report, Intersections: Third-quarter 2009 global transportation and logistics industry mergers and acquisitions analysis.
Twenty deals with a total value of $6.2 billion were announced during Q3, compared with 31 deals with a value of $5.4 billion in the first half of 2009. The improvement in the pace of deals announced can be attributed to passenger air deals, several of which involved entities in the Asia & Oceania region, as well as smaller deals involving U.S. entities.
The first two large deals of 2009 were announced during Q3, accounting for 38 percent of total deal value for the quarter. Interest from financial investors picked up in Q3, making up 35 percent of deal volume, compared to 16 percent during the first half of 2009. However, strategic investors still account for a majority of deals in Q3 (65 percent).
Asia & Oceania accounted for the vast majority of T&L deals in Q3, with targets in the region making up 50 percent of deal volume and 62 percent of deal value, while acquirers in the region accounted for 55 percent and 67 percent of deal volume and value, respectively.
For more information and to access the reports, visit: www.pwc.com/us/industrialproducts
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