Industrial Manufacturing M&A Hits $22.6 Billion in Q4

Deal volume and deal value hit a three-year high

Fourth-quarter 2010 global industrial manufacturing mergers and acquisitions comprised more than 40% of the volume in 2010 and almost 45% of the years value, with 52 deals equaling $22.6 billion, according to new PwC report. For a total of $51.1 billion, 129 deals were completed for full-year 2010.

Year-over-year, full-year deal volume exceeded 2009 by 37% and deal value grew 125%.

The fourth quarter's deal volume and deal value both tallied the highest quarterly totals of the past three years, according to the report. One driver of the increase in deal value was the continued growth of mega-deal activity, classified as transactions of $1 billion or more, with four deals totaling $9.6 billion in Q4. This brought the aggregate value of the 10 mega-deals in 2010 up to $24 billion, almost seven times greater than that of 2009, when there was just a single mega-deal.

While transactions including U.S. targets and/or buyers declined as a proportion of total deals in the fourth quarter, two of Q4s mega-deals involved U.S. targets. This may be a sign that although many investors are likely concerned about the relatively slow growth in the U.S., there continues to be an interest in gaining access to its large market and the technologies held by U.S. players, PwC concludes.

"Though high levels of unemployment, concern over weak economic growth, and European debt woes may continue to constrain investment, we believe buyers remain optimistic in their near-term economic outlooks," said Barry Misthal, U.S. industrial manufacturing leader for PwC. "As we look at 2011, several indicators, including strong balance sheets, reduced costs, and margin growth lead us to conclude that deal activity will continue to increase in the coming year."

North America remained a strong region for overall deal activity as well, with 13 transactions announced in the region in Q4 versus 41 in all of 2010. Deals based in the UK and Eurozone region led as the drivers of deal activity in the fourth quarter of 2010, with 35% of all transactions valued at $50 million or more announced in the region. Additionally, Q4 activity affiliated with Brazil, Russia, India and China (BRIC) grew in comparison with the third quarter, with eight deals announced for BRIC targets.

Cross-border deals represented 50% of announced deals worth $50 million or more in Q4 2010, up 72% from Q4 2009. "As economies further improve, we expect cross-border deal activity to continue to rise as perceived rewards begin to outweigh perceived risks," added Misthal. "The need of corporations to augment slow organic growth by entering new, faster-growing geographies and repositioning their product portfolios for increased growth will also aid this uptick in cross-border activity."

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