Manufacturing Deals Plummet

Recession slows mergers and acquisitions activity during the first half of 2009

Mergers and acquisitions in manufacturing valued at $50 million or more declined 71% in the first half of 2009 as investors remain cautious during the economic slowdown, according to a PricewaterhouseCoopers LLP report.

Deals totaled 26 in first-half 2009, down from 90 during the same period last year, PwC reported.

Only 12 deals were announced in second-quarter 2009, a steep drop from the 47 recorded in the prior-year period.

Total deal value in the first six months was approximately $4 billion, an 85% decline from the $27 billion reported in first-half 2008. In addition, average deal value declined to $153 million, a 48% year-over-year drop.

"Constrained corporate profits, high unemployment, and pessimistic economic forecasts continue to curb investor appetite for acquisitions," said Paul McCarthy, U.S. industrial manufacturing transaction services strategy leader at PricewaterhouseCoopers, in a prepared statement. "As weak global economic fundamentals continue to depress deal volume and value, we continue to believe distressed transactions will drive deal activity."

There was no reported large deal activity -- defined as deals with a disclosed value of at least $1 billion -- in the first half. In addition, only 26 deals had a disclosed value greater than $50 million versus 86 in first-half 2008.

"This lull in large deal activity is expected, given continued global economic weakness," PwC reported. "Industrial manufacturing will not likely see a return of large deals until investor confidence returns and a global economic and credit recovery is realized."

Asia and North America were responsible for 69% of mergers and acquisitions during the first half, up from 55% during the same period last year, but most of the activity is coming from the Asia/Pacific region, which accounted for 42%of deal volume.

"Deal activity in North America continued to be sparse compared to historical levels," said Barry Misthal, U.S. industrial manufacturing leader, PricewaterhouseCoopers. "However, the substantial increase in deal activity in Asia & Oceania suggests that companies in that region are taking full advantage of the declining asset values. Given the opportunity this region presents, it will likely continue to be a driver for global M&A activity."

To access the full report, including a special section on China, visit www.pwc.com/us/industrialproducts.

TAGS: Trade
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