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Sun July 21 2019

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Mergers and acquisitions decline

25 Apr PwC’s latest quarterly analysis of merger and acquisition (M&A) activity in engineering and construction shows a decline compared to recent years.

PwC's Colin McIntyre
PwC's Colin McIntyre

M&A activity within the sector continued to lag prior years both in terms of overall deal value and volume. Deal volume and values for the first quarter of 2019 were at the lowest quarterly level in the last three years.

The Q1 2019 value of US$15.6bn (£12bn) was down 30% compared to Q1 2018; on a volume basis Q1 2019 decreased 25%. During Q1 2019 there was only one deal with value above US$1.0bn.

“Q1 2019 M&A activity was off significantly from the same period in 2018,” said PwC’s US engineering and construction deals leader Colin McIntyre. “Economic uncertainty combined with ongoing trade disputes and related geopolitical tensions outweighed underlying solid sector fundamentals.”

Going into the second quarter, resolution of trade disputes and some favourable economic data could help drive increased M&A activity, says the report.

In the UK and Eurozone, there were 108 local deals, worth US$1.1bn. There were 18 ‘inbound’ deals with a total value of US$386m and 21 ‘outbound’ ones, worth US$515m.

The Asia & Oceania region was the most active buyer in the global engineering and construction sector. In Q1 2019, the region made up for 65% of deal value. This was driven by the acquisition of Beijing Easyhome Home New Retailing Chain Group by Wuhan Zhongnan Commercial Group for US$5.9bn.

Sector M&A activity continues to be dragged by economic uncertainty, ongoing trade friction and associated geopolitical tension, said PwC. These factors cloud otherwise good underlying fundamentals – such as the replacement of ageing infrastructure and the role of population growth in fuelling demand for housing and infrastructure.

Coming out of Q1 there were some positive signs including progress on a China-US trade resolution, a stable market outlook and ongoing discussions of an infrastructure bill in the US. “Further progress on all these fronts will have a positive impact and help drive a recovery of M&A activity towards more recent historical levels in Q2 2019 and beyond,” said PwC.

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