The merger and acquisition (M&A) deal activity in the global industrial manufacturing industry showed marked improvement from the first quarter of 2010, with an increase in both deal volume and value in the second quarter of 2010, according to a new PricewaterhouseCoopers LLP report.
In the second quarter of 2010, there were 33 announced deals worth $50 million or more, which is more than double the 14 deals announced in Q1 2010. And, deal value totaled $8.5 billion in Q2, more than triple the $2.3 billion in value announced in Q1 2010. Additionally, both deal volume and value also saw an increase in a year-over-year basis, up from 12 deals with a total value of $3.2 billion in Q2 2009.
Driving this activity, as global economic trends continue to improve, are smaller deals and transactions with undisclosed values, which stays on par with historical trends, according to the report. However, middle-market, large and mega-deal activity continues to increase and the near-term outlook points to sustained growth.
Showcasing this trend are the two mega-deals (transactions of $1 billion or more) in Q2 2010, compared to Q1 2010 when no mega-deals were announced and the entirety of 2009 when only one mega-deal was announced.
"Looking ahead, we expect the deal environment will continue to improve as credit access eases, equity markets advance and economic growth rates stabilize. However, although many factors have improved, others remain weak, such as stubbornly high levels of unemployment and weak residential construction activity," said Barry Misthal, U.S. industrial manufacturing leader, PricewaterhouseCoopers. "Nevertheless, we believe that buyers are becoming increasingly optimistic in their near-term economic outlooks."
Transactions including U.S. targets and/or buyers continued to drive deal activity during Q2 2010 with 36% of the total transactions over $50 million involving a U.S. entity. This compares with an average of 61%t over the past 4 years (2006-2009).
Additionally, the level of activity affiliated with BRIC (Brazil, Russia, India, China) countries grew with China serving as the key driver. This contributed to targets located in Asia and Oceana taking the lead in deal activity, as 45% of all transactions valued at $50 million or more were announced in the region.