We have a new President and a new administration. And what this means for businesses, we’re not sure. But aside from the uncertainty, we’re increasingly seeing an optimistic attitude from businesses. Companies are fairly optimistic about the opportunities for growth and we may see a more business-friendly environment under the new administration. That will be conducive to potential deals activity.
We will all have to monitor to see what policies will get affected – tax, trade, regulation, infrastructure and defense. But from a deals perspective, we’re keeping an eye out for any changes made with the trade policy, as it may impact cross-border transactions. On a more nationalistic view, we may potentially see more domestic deals than foreign deals.
Here is a breakdown of Q4 M&A activity across the following sub-sectors: aerospace & defense (A&D), chemicals, engineering and construction, industrial manufacturing, metals and transportation and logistics:
Aerospace & Defense
- There were 19 deals with a total value of $17.1 billion in Q4 2016 – an increase in both volume and value of 73% and 180%, respectively, when compared to the previous quarter.
- The North American region continues to dominate in transaction value, accounting for 57% of total deal value in 2016.
- Outlook: Optimistic on growth as defense companies continue to focus on their portfolios investing in technology, while commercial players will overcome recent order declines by leverage strong backlogs.
- Global Chemicals M&A deal value totaled $198 billion in 2016, a 39% increase in 2015 with136 deals in 2016 compared to 141 deals in 2015.
- While the Fertilizer and Agriculture category led deal value in 2016, the Industrial Gases category had the largest transaction in Q4 2016.
- Outlook: There’s uncertainty whether or not the four pending megadeal transactions in the Agriculture and Industrial Gases sub-sectors will come to completion, but there are abundant opportunities for both strategic buyers and private equity to acquire businesses being divested for anti-trust reasons or portfolio realignment.
Engineering & Construction
- The sector had 305 deals in 2016, 22% higher than 2015, and deal volume decreased by 4% in value with $110 billion in 2016 compared to $136.9 in 2015.
- The Asia & Oceania region continues to be the most active region in deal activity by volume, accounting for 62% of acquirers and 63% of targets in global transactions.
- Outlook: May be an upside for the US with potential legislation around infrastructure spend and corporate tax reform, potentially increasing interest in US assets both domestically and inbound from buyers looking for growth.
- There were 226 deals in 2016 compared to 274 deals in 2015, an 18% increase, and total value of $91.3 billion in 2016 to $93.7 billion in 2015, a 3% decrease.
- There were three transactions exceeding $1 billion in Q4 by financial buyers with a total aggregate value of $9.2 billion.
- Outlook: The environment may be ripe for deals – inorganic growth may be a tool used by many strategic and financial investors to differentiate their products and services to ensure competitive advantage.
- The Metals sector had 29 deals with a total value of $12.9 billion, compared to 21 deals with a total value of $11.5 billion in the previous quarter, a 12% and 38% increase, respectively.
- Both deal volume and deal value were driven by acquisitions in the Steel category in 2016.
- Outlook: Pent up demand for deals and large availability of capital around the world, high levels of liquidity on corporate balance sheets, and increasing role of financial investors may drive future metals M&A activity.
Transportation & Logistics
- The global Transportation and Logistics sector closed 2016 at a relatively stable level of M&A activity – there were 225 deals with a total value of $122 billion.
- Transactions with announced value greater than $1 billion made up 60% of total deal value in 2016, compared to 68% in 2015.
- Outlook: Consolidation will continue to drive M&A as certain sectors struggle with overcapacity, most notably shipping, airline freight, and railroad.
For more information on each sub-sector’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.
©2016 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.