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M&A in industrial products sector soars past $500 Billion in 2014

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M&A in industrial products sector soars past $500 Billion in 2014

Continued momentum expected in 2015.

The industrial products sector finished 2014 with an improved M&A environment, recording an increase in both deal volume and value compared to 2013, according to professional services giant PwC US.  All six IP sectors – aerospace & defense, chemicals, engineering & construction, industrial manufacturing, metals and transportation & logistics - saw an uptick in deal volume, while four out of the six saw an increase in deal value.

"Globally, 2014 was a strong year for M&A activity across the industrial products sector, and we expect this momentum to continue in 2015," said Bob McCutcheon, PwC's U.S. industrial products leader. "CEOs are more optimistic about the state of the U.S. economy and growth prospects domestically. That CEO confidence coupled with historically low commodity prices, new advanced technologies and a skilled U.S. labor force will likely continue to give the U.S. industrial products sector competitive advantage in the marketplace. We believe that the U.S. manufacturing resurgence will also continue and M&A will be a big part of the industry's growth prospect going forward."

"Strategic investors continued to dominate M&A activity in 2014."

The firm’s analysis of the industrial products sector showed that North America had an increase in local, inbound and outbound activity, recording 300 deals worth more than $50 million in 2014, compared to 252 deals in 2013. 

Across the entire IP industry, there were 957 deals worth more than $50 million, totaling $511 billion in 2014, compared to 764 deals and a total value of $273 billion in 2013 – an increase of 25 percent in volume and 87 percent in value. The chemicals sector was the most active in 2014, with an increase of 50 percent in deal volume, recording 177 deals with a total value of $85 billion — up from 111 deals and $40 billion in 2013. The engineering & construction industry saw the highest value increase in 2014 with 218 deals totaling $172 billion— from 173 deals totaling $54 billion, an increase of 215 percent year over year.

Megadeals, or transactions worth more than $1 billion, also increased in 2014, with 95 compared to 62 in 2013. Four IP subsectors – A&D, chemicals, engineering & construction and industrial manufacturing –all doubled or closely doubled in megadeals from 2013 to 2014. The A&D sector had its first defense-oriented megadeals in 2014 since the Budget Control Act of 2011.

Strategic investors continued to dominate M&A activity in 2014, but there was also an uptick in financial investors exiting their investments across all six IP sectors. The metals sector saw the highest financial investor exits in 2014 with 11 percent of them involved in deals worth more than $50 million, compared to three percent in 2013.

Regionally, Asia and Oceania had the most IP M&A activity in 2014, driven by an increase in local deals – 428 deals worth more than $50 million compared to 291 deals in 2013. The chemicals sector had a particularly notable increase – 108 percent – in local deals in the Asia and Oceania region, with 96 deals worth more than$50 million in 2014, up from 46 deals in 2013.

"As U.S. strategic investors look to deploy cash, and leverage the strong dollar to offset the weakness in foreign sales and foreign exchange headwinds, we expect cross-border activity to pick up especially with U.S. outbound deals as corporate dealmakers look to Europe and Asia for opportunistic transactions," concluded McCutcheon.

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