Manufacturing Acquisitions Declining

Credit crunch leads to fewer deals, but weak dollar drives up foreign investment in the U.S.

Average acquisition value in the manufacturing sector was down 21% during the first half of 2008 amid a tightening credit market, according to a PricewaterhouseCoopers LLP report.

The 76 deals during the first two quarters should match 2006 levels, but large transactions--- those valued at $50 million or more -- are down significantly, according to the report entitled "Assembling value: Industrial Manufacturing mergers & acquisitions analysis -- Second quarter 2008."

Large transactions during the first half totaled $24.9 billion, which is on pace to fall well short of the $87 billion mark reached in 2007. Only four large deals were announced during the second quarter. A total of 17 large deals were announced in 2006 and 2007.

The reduction in large deals also contributed to a lower average disclosed deal value, which dropped to $328 million from $417 million during the first half of 2007.

Industrial machinery manufacturers lead deal activity in the sector, with 46% of deal value announced during the first half of 2008. Deals in the fabricated metal products industry were down, but activity has increased in the rubber and plastics industries.

Regional findings show that acquisitions of U.S. manufacturers declined during the first half of 2008, but the number of acquisitions of U.S. manufacturers by non-U.S. companies is on pace to exceed 2007 (14) and 2006 (12) levels, with seven already reached in the first half. Interest in U.S. targets on the part of cross-border acquirers is expected to remain high because of the weakness of the U.S. dollar.

For more information on report visit www.pwc.com/manufacturing.

TAGS: Trade
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