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Value of mergers and acquisitions falls

27 Jul 20 The value of mergers and acquisitions (M&A) fell in the first six months of 2020 compared to the same period last year as Covid-19 combined with an already downward trend.

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.

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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.

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