There were 64 deals worth more than US$50m, giving a total value of US$54bn in the fourth quarter of 2014, a 250% increase in deal value from US$15bn in the fourth quarter of 2013, and an increase of 108% from the previous quarter of 2014 recording US$26bn. Among the fourth quarter deals, construction material was the largest segment with 22 transactions worth more than US$50m, followed by construction machinery with 13 deals.
PWC’s latest quarterly analysis of the global deal activity in the engineering and construction industry found there were 218 deals worth more than US$50 million and a total deal value of US$172bn. The value was more than triple the previous year’s US$55bn and only slightly below the 10-year high set in 2007. In regards to deal volume, the sector saw a 25% increase from 2013 with 173 transactions.
“Some of the significant year-over-year growth in M&A activity can be attributed to companies seeking to better position themselves for ‘mega projects’ that not only require a longer commitment of time and capital, but also deeper pools of highly skilled talent,” said Kent Goetjen, US engineering and construction leader at PwC. “The lack of available talent, which is being fueled in the U.S. by the retirement of the baby-boomer generation, is driving up the price of acquisitions and will continue to do so for the foreseeable future.”
Much of the fourth-quarter increase can be credited to four ‘megadeals’ (transactions worth more than US$1bn), which accounted for US$40bn or nearly 74% of all deal value for the fourth quarter of 2014, which also included the largest deal of the year, valued at US$35bn. The year rounded out with a total of 21 megadeals with a value of $127 billion.
“While we expect deal activity to continue at a brisk pace in 2015, it will be difficult to match the size of the 21 megadeals completed in 2014,” said Goetjen. “Regardless of whether engineering and construction companies are looking to make acquisitions or divest non-core assets, they will continue to focus on their long term strategic goals, rather than the short term economic and commodity environment, when making decisions regarding M&A activity in 2015. Instead, these decisions will be driven by the talent gap, the size and complexity of projects, the increasing prevalence of public-private partnerships and the necessity of being a full-service provider to maintain their position within the industry.”
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