Mega deals drive surge in industrial manufacturing deal value in third quarter

November 15, 2013

Deal activity in the industrial manufacturing sector experienced an uptick in the third quarter of 2013, while merger and acquisition (M&A) value for the quarter rose to the highest level since the fourth quarter of 2007. The strength of industrial manufacturing M&A in the past three months was driven largely by strategic investors in advanced economies and increased mega deal (transactions valued at $1 billion or more) activity, according to PwC US, New York, N.Y.

In the third quarter of 2013, there were 41 transactions worth more than $50 million for a total deal value of $29.4 billion, compared to 36 deals worth $12.7 billion in the second quarter. This jump in value represents a 131 percent increase over the previous quarter, owing to the six mega deals that took place in the third-quarter 2013. Industrial manufacturing mega deals in the third quarter accounted for $22.4 billion, or 76 percent of total deal value, contributing to a 104 percent increase in average deal size compared to the previous quarter. According to PwC, most of the quarter' mega deal activity involved strategic investors buying industrial machinery companies, primarily driven by a desire to expand into complementary and relatively high-growth products.

"Strategic acquirers with strong cash positions, balance sheets, and access to debt markets executed on large transactions in the industrial manufacturing sector in the third quarter," said Bobby Bono, U.S. industrial manufacturing leader for PwC. "Looking forward, we expect China and the U.S. will remain fertile grounds for strategic acquirers who are evaluating opportunities to build their portfolios with assets from private equity exits in industrial machinery. At the same time, strategic acquirers are concerned about the broad economic environment, and they are taking a cautious approach to their deal strategies."

Strategic investors accounted for the majority of industrial manufacturing transactions in the third quarter of 2013, representing 68 percent of total deal volume. Financial investors were focused mainly on secondary private equity investments.

Led by the U.S., which recorded 13 transactions worth more than $50 million, acquirers from advanced nations continued to dominate M&A activity in the third quarter of 2013, accounting for 85 percent of transactions. Asia and Oceania remained the most active as acquirers in this region accounted for 14 deals valued at more than $50 million, with Japan taking the lead after completing five deals. As the only BRIC country to record a deal worth more than $50 million in the third quarter of 2013, China-involved deal activity remains on pace for a robust year. According to PwC, industrial manufacturing deals in China have primarily focused on local market consolidation of machinery companies as the Chinese national government continues to encourage domestic acquisitions to improve industry competitiveness.

PwC's industrial manufacturing M&A analysis is a quarterly report of announced U.S. transactions with value greater than $50 million analyzed by PwC using transaction data from Thomson Reuters.



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