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Smaller, local deals drive Q1 industrial products M&A

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Smaller, local deals drive Q1 industrial products M&A

Mega deals support increased deal value.

Merger and acquisition (M&A) deal value in the global industrial products industry rose significantly on a year-over-year basis during the first quarter of 2014, according to recent report by professional services firm PwC US. 

While the increase in deal value was driven by mega deals (transactions worth more than $1 billion) compared with the first quarter of 2013, the majority of deal volume was a result of dealmakers executing on smaller, local deals.

"While confidence among management teams is improving as the global economy gradually recovers, acquirers have remained cautious and are mostly looking to pursue primarily small, local deals," said Robert McCutcheon, U.S. industrial products leader, PwC. "Management teams continue to focus on organic as well as inorganic growth but are cautious about investing on a larger scale. Acquisitions are focused principally on investing in core products and services in an effort to expand market share, while also delivering direct returns to shareholders via dividends and share buy-backs.

"Management teams continue to focus on organic as well as inorganic growth but are cautious about investing on a larger scale."

“Deal multiples have increased, which has advantaged strategic investors that can use their stock as currency to fund M&A activity.  As the overall global economic recovery continues to take hold and more established markets gain their footing, we believe the IP space will see an increase in deal activity as companies ultimately recognize the need to participate in faster growing markets globally."

Across the entire IP industry, there were 156 transactions worth $50 million or more, totaling $64.7 billion in the first quarter of 2014, compared to 159 deals and $54.6 billion in total value during the first quarter of 2013. Transportation & logistics was the most active sector in the first quarter, representing 37 transactions worth $50 million or more, totaling $16.1 billion. The industrial manufacturing sector finished second with 33 deals totaling $14.7 million, followed closely by the engineering and construction sector with 32 transactions valued at $15.2 million.


"We're closely following the level of M&A activity and potential for growth in the engineering and construction space as the global shift in economic power and urbanization could further drive interest in infrastructure build," added McCutcheon.

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