Introducing PwC #DealsDay – Industrial products perspectives

July 28, 2016

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By Robert McCutcheon, Partner, US Industrial Products Leader

PwC today launched the firm’s first-ever #PwCDeals Day where all of industry sector M&A reports are released to share PwC’s holistic look at M&A activity, while also looking at how individuals sectors compare to each other.

PwC’s Industrial Products practice has analyzed M&A activity for the second quarter of this year across our subsectors, including aerospace and defense (A&D), chemicals, engineering and construction, industrial manufacturing, metals, and transportation and logistics.

Here’s a subsector breakdown of our analysis for Q2 M&A activity:

Aerospace & Defense

  • There were eight deals valued at $5.8 billion in Q2 2016 – a decline of 20% and 24%, respectively, when compared to the previous quarter.
  • The Aircraft & Parts category of A&D has led deal activity in prior quarters, but it saw no deals valued at more than $50 million.
  • Outlook: Q2 2016 M&A activity was one of the lowest in recent history, but we believe that strong defense company balance sheets and solid fundamentals in the commercial portion of the sector will contribute to an improving deal market in 2016.

Chemicals

  • There were 38 deals valued at $67.1 billion in Q2 2016, an increase of 52% and 12%, respectively, from the previous quarter.
  • Deal value in Q2 2016 was driven by the fertilizers and agricultural chemicals category with 83% of the share of total value.
  • Outlook: Chemicals companies are motivated to grow by acquisitions or add shareholder value through portfolio realignment. We also expect private equity will continue to look for opportunities to deploy capital at an increasing rate over the next 12 to 24 months.

 

Engineering & Construction

  • There were 68 deals with a total value of $21.9 billion in Q2, with no changes in volume but a 42% decrease compared to the previous quarter.
  • There were 19 deals in the construction materials manufacturing subsector, followed by civil engineering and home building sub-sectors with 14 deals each.
  • Outlook: Continued high levels of liquidity on balance sheets to fuel non-organic growth opportunities will influence M&A activity in the engineering and construction space as we enter the second part of 2016.

Industrial Manufacturing

  • Q2 2016 deal value and volume was $11.5 billion and 41 deals, reflecting declines of 65% and 18% in value and volume, respectively, from the previous quarter.
  • Deal value for Industrial Machinery, the largest category within industrial manufacturing, declined by 71% in Q2, but saw an increase of five deals compared to Q1 2016.
  • Outlook: Deal makers in this space may pursue less risky strategic alliances to expand market share and optimize value as an alternative to pure M&A plays.

Metals

  • Q2 deal volume and value was 17 transactions worth $2.8 billion – down 6% and 73%, respectively, compared to Q1 2016.
  • Steel and aluminum had a decline in M&A activity during Q2 2016, but aluminum’s deal value increased by 19% compared to Q2 2015.
  • Outlook: High levels of liquidity on corporate balance sheets and strong economic recovery and pent-up demand in developed countries will spark metals M&A growth.

Transportation & Logistics

  • The deal volume and value grew by 6% (51 deals) and 20% ($34 billion), respectively, in Q2 2016 compared to the previous quarter.
  • There were five megadeals with a total aggregated disclosed value of $26.7 billion. The highest value deal occurred in the Trucking subsector.
  • Outlook: Strong positive outlook for global M&A activity, driven by the continued expansion of e-commerce and the demand it creates for investment in the logistics sector, in addition to corporations outsourcing logistics as it comes a more specialized and technology-driven function.

For more information on each subsector’s M&A analysis, visit our website.

You can also follow PwC’s M&A analysis across all industries by following the conversation on Twitter using #PwCDeals.

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