Home » Industrial Manufacturing M&A Activity Falls Significantly in 2008
Industrial Manufacturing M&A Activity Falls Significantly in 2008
February 16, 2009
Deal activity in the global industrial manufacturing industry declined significantly in 2008, according to the PricewaterhouseCoopers LLP report Assembling Value: Fourth-quarter 2008 Mergers and Acquisitions Analysis. Compared with 2007 M&A levels, overall deal volume decreased 32% and deal value fell 57% in 2008.
The pace of M&A activity during 2008 (141 deals), as measured by the number of deals with a disclosed value of at least $50 million, fell behind levels set in 2006 (169 deals) and 2007 (206 deals). Similarly, the number of deals announced during the fourth quarter of 2008 (11) is well behind the number of transactions announced during the fourth quarter of 2007 (71).
Total deal value reached $39 billion in 2008, less than half of the $88 billion raised in 2007. In the fourth quarter, total deal value announcements totaled $3 billion, compared with $40 billion announced in the same quarter of 2007. In addition, average deal value dropped significantly in 2008, with deals averaging $275 million, far behind the averages in 2007 ($424 million) and 2006 ($545 million).
The dramatic decline in deal value can be attributed to an overall slowdown in large deals during the past year, as only five large deals (disclosed deal value of at least $1 billion) were announced in 2008; 2006 was marked by 23 large deal announcements, and 17 large deals were announced in 2007.
Deal activity in the industrial manufacturing sector took a hit in 2008, and we will continue to see muted M&A activity as large deals subside during this difficult financing environment, said Paul McCarthy, U.S. industrial manufacturing transaction services strategy leader at PricewaterhouseCoopers. "However, from observations of deal activity during the past year, we anticipate that the pace of industrial manufacturing deals will likely increase as the economy improves and anxieties over a global recession diminish."
Financial buyers, who are typically involved in larger deals in the manufacturing sector, cut their investments during 2008, due to the turbulent credit markets and a tightened lending environment. Overall, financial investors participated in only 37 deals in 2008, significantly behind the pace set in 2007 (72 deals) and 2006 (58 deals). Strategic investors claimed ownership of 104 deals in 2008, which is also down from levels set in 2007 (134 deals) and 2006 (111 deals).
Deal value for U.S. targets (with a disclosed deal value of at least $50 million) announced during 2008 decreased to $39 billion, a 56% drop from 2007 ($88 billion). Not one cross-border deal for a U.S. target took place during the fourth quarter of 2008.
Meanwhile, deal activity for industrial manufacturing targets in China increased in 2008, with 19 deal announcements in 2008 compared with 18 deals in 2007 and 10 deals in 2006. However, global economic conditions had a negative effect on the other BRIC nations, none of which participated in M&A activity during the fourth quarter of 2008.
On the transportation and logistics side, there were 43 announced mergers and acquisitions in the fourth quarter with a disclosed deal value of at least $50 million, on part with the 46 deals announced in the third quarter 2008. Deal activity in the sector slowed for the year, with 181 deals in 2008, compared with 192 in 2007.