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Industrial Products Sector M&A Value Rises More Than 23% in Q3

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Industrial Products Sector M&A Value Rises More Than 23% in Q3

Small and middle market local deals continue to lead activity.

Small and middle market companies drove an increase in Q32013 M&A value in the global industrial products industry, according to a new report from PwC US.

According to the report, the increase was driven specifically by the industrial manufacturing sector, according to PwC US’ analysis of deal activity in the third quarter of 2013 across six sectors: aerospace & defense (A&D), chemicals, engineering & construction, industrial manufacturing, metals and transportation & logistics.

"We saw companies continue to pursue smaller, local market transactions and focus on internal investment in an effort to boost organic growth in the third quarter. While concerns around the outlook for the global economy, particularly the Eurozone, and mixed signals regarding U.S. fiscal policy remain, balance sheets are strong and companies are continuing to carefully evaluate M&A strategies, potentially boding well for future deal activity," said Robert McCutcheon, PwC's U.S. industrial products leader.

Comparing all transactions with a value exceeding $50 million in the third quarter to the second quarter of 2013, deal volume was flat and value increased across the IP industry, recording 169 transactions totaling $65.7 billion in the third quarter, compared to 171 deals with $53.3 billion in total value in the previous quarter. Four of the six IP sectors posted moderate sequential increases in M&A volume in the third quarter compared with the second quarter of 2013, led by the chemicals industry, which recorded 23 transactions compared to 18 in the second quarter. In terms of total deal value, the industrial manufacturing sector was the leader, posting $29.4 billion in total deal value in the third quarter, up from total deal value of $12.7 billion in the second quarter.

The volume of mega deals (value exceeding $1 billion) remained at low levels during the third quarter as much of the activity revolved around small and middle market transactions. Highlighting the trend, four of the six IP sectors recorded only one mega deal apiece in the third quarter. The industrial manufacturing sector stood out from the pack, recording six mega deals during the third quarter, compared to three in the second quarter of 2013, but down from eight mega deals in last year's third quarter.

"Strategic investors continued to drive the majority of deal activity across the industry during the third quarter, reflecting their focus on longer-term investment initiatives. We saw much of this activity in the chemicals sector where several companies engaged in strategic reviews of their assets to better align their business strategies with growth opportunities ahead," continued McCutcheon. "In the third quarter, we witnessed a decline of involvement from financial investors across every sector. The exceptions were the A&D and industrial manufacturing sectors where PE firms are looking for opportunities to exit their investments made just before the economic downturn to retrieve some of their capital."

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