The value of M&A in the engineering and construction sector around the world fell to US$41bn (£32bn) from US$45bn in the first half of 2019, according to the figures from PwC. A similar trend was noticed for deal volume, with the first half of this year registering 1,017 deals compared to 1,221 deals in 2019.
Deal value decreased from US$33bn in Q1 2020 to US$8bn in Q2 2020, and total deal value in Q2 2020 was the lowest in the last eight quarters. This could be attributed to US trade sanctions and the Covid-19 pandemic, said PwC.
Total M&A transaction values and volumes have been decreasing over the last two calendar years, said PwC, and the global Covid-19 pandemic, decreasing oil prices and geopolitical tensions contributed to continued contraction during 1H 2020.
“M&A activity in Q2 2020 was the lowest in the past eight quarters with low oil prices and Covid-19 representing the most significant challenges,” said PwC’s US engineering and construction deals leader Eric Cullers. “As a result, we expect 2020 to end as a fourth consecutive year of decreasing M&A value. However, there will be opportunities to fuel a recovery within select segments.”
Cross-border M&A transaction value represented 58% of total transaction value in 1H 2020 compared to 42% in 1H 2019.
The top 10 deals totalled up to US$26.7bn, accounting for 66% of the total deal value in H1 2020.
The largest deals involved Thyssenkrupp, Siemens Games Renewable Energy, Omtel, Miller Pipeline, Maeda Road Construction, Emami Cement, Mankato Energy, Isaria Wohnbau and Sichuan Road & Bridge.
The highest deal value was the acquisition by Thyssenkrupp’s UK elevator technology business of its counterpart in Germany.
Civil engineering experienced a decline in both transaction value and volume. The sub-sector accounted for 6.6% of the total deal value in H1 2020, driven by three of the top ten deals.
Construction went through a decline of 55% and 9% in terms of deal value and deal volume, respectively, in H1 2020 from H1 2019. Four of the top ten deals in H1 2020 were from the construction sub-sector.
The construction materials manufacturing sub-sector witnessed a decline of 57% and 28% in deal value and volume, respectively, in H1 2020 compared to H1 2019. The subsector included the acquisition of Emami Cement’s deal by Nuvoco Vistas for $773m.
Home building experienced a decline of 30% in deal value accompanied with a 4% decline in volume in H1 2020 compared to H1 2019.