M&A to Fall Short of 2007 Levels, Says PricewaterhouseCoopers
May 2008
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NEW YORK—Weakness in the U.S. economy continues to affect M&A deal activity and value in the industrial products sectors, specifically industrial manufacturing, transportation & logistics, chemicals, and metals, according to a series of PricewaterhouseCoopers LLP first quarter M&A reports released today. While deal activity remains steady, deal volume and value is not on pace to exceed 2007 levels; however, the number of deals announced during the quarter is on track to meet or exceed 2006 levels.
The slowdown in the pace of large deals announced in the first quarter is a direct reflection of the difficult financing environment. Only the transportation & logistics sector is on pace to exceed the level of large deals in both 2006 and 2007. Deal interest for targets in Asia has been particularly strong during the quarter across each subsector. Additionally, the weak U.S. dollar is driving the increased interest in U.S. targets by cross-border acquirers.
“Record levels of M&A were reached in 2007 across the various sub-sectors. Given the economic downturn in the United States we cannot expect to see similar levels or value this year; however, our Q1 analyses show respectable levels of activity,” said Dean Simone, U.S. industrial products leader at PricewaterhouseCoopers. “This economy offers significant opportunities specifically for those well-capitalized strategic investors who are in the best position to initiate deals.”
Details on each sub-sector M&A report follows:
Industrial Manufacturing
Deal activity in the global industrial manufacturing sector declined slightly in the first quarter of 2008, according to the inaugural edition of “Assembling Value: Global Industrial Manufacturing Mergers & Acquisitions Analysis.” A total of 39 deals (disclosed value at or above $50 million) were announced in Q1 2008, down from the 47 announced deals in the first quarter of 2007 but on par with the 38 deals seen in Q1 2006.
Total deal value for industrial manufacturing transactions during the first quarter of this year totaled $7 billion, a significant decline from $13 billion in the first quarter of last year and the $31 billion announced in Q1 2006. The decline in total deal value is related to a slowdown in large deals (disclosed value of at least $1 billion), of which there were none in Q1 2008 compared to 17 announced in 2007 and the 17 in 2006.
Overall, the pace of deals involving U.S. targets declined (12 announced deals) in Q1 2008 as compared to the total deals announced over the past two years (65 deals in 2007 and 51 deals in 2006). However, the proportion of foreign acquisitions of U.S. targets has increased by 33 percent in number of deals during the first quarter of 2008 as compared to only 22 percent of deals announced during 2006 and 2007. The relative weakness of the U.S. dollar has likely been a key factor in this change, since it makes acquisitions of U.S. targets more attractive to foreign entities.
The slowdown in the pace of large deals announced in the first quarter is a direct reflection of the difficult financing environment. Only the transportation & logistics sector is on pace to exceed the level of large deals in both 2006 and 2007. Deal interest for targets in Asia has been particularly strong during the quarter across each subsector. Additionally, the weak U.S. dollar is driving the increased interest in U.S. targets by cross-border acquirers.
“Record levels of M&A were reached in 2007 across the various sub-sectors. Given the economic downturn in the United States we cannot expect to see similar levels or value this year; however, our Q1 analyses show respectable levels of activity,” said Dean Simone, U.S. industrial products leader at PricewaterhouseCoopers. “This economy offers significant opportunities specifically for those well-capitalized strategic investors who are in the best position to initiate deals.”
Details on each sub-sector M&A report follows:
Industrial Manufacturing
Deal activity in the global industrial manufacturing sector declined slightly in the first quarter of 2008, according to the inaugural edition of “Assembling Value: Global Industrial Manufacturing Mergers & Acquisitions Analysis.” A total of 39 deals (disclosed value at or above $50 million) were announced in Q1 2008, down from the 47 announced deals in the first quarter of 2007 but on par with the 38 deals seen in Q1 2006.
Total deal value for industrial manufacturing transactions during the first quarter of this year totaled $7 billion, a significant decline from $13 billion in the first quarter of last year and the $31 billion announced in Q1 2006. The decline in total deal value is related to a slowdown in large deals (disclosed value of at least $1 billion), of which there were none in Q1 2008 compared to 17 announced in 2007 and the 17 in 2006.
Overall, the pace of deals involving U.S. targets declined (12 announced deals) in Q1 2008 as compared to the total deals announced over the past two years (65 deals in 2007 and 51 deals in 2006). However, the proportion of foreign acquisitions of U.S. targets has increased by 33 percent in number of deals during the first quarter of 2008 as compared to only 22 percent of deals announced during 2006 and 2007. The relative weakness of the U.S. dollar has likely been a key factor in this change, since it makes acquisitions of U.S. targets more attractive to foreign entities.
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