Deal Volume Tumbles At the Start of 2009 in the Global Transportation & Logistics, Industrial Manufacturing, Metals, and Chemicals Industries, Finds PricewaterhouseCoopers

Large Transactions Put On Hold as Financial Investors Back Away From Deals; PwC Advises On the Auto Ramifications of the Bailout Package On the Industrial Products Sector


NEW YORK, May 14, 2009 (GLOBE NEWSWIRE) -- The pace of mergers and acquisitions drastically declined across industrial products sectors, according to a series of first-quarter M&A reports released today by PricewaterhouseCoopers LLP (PwC). Deal volume in the global transportation and logistics (T&L), industrial manufacturing, metals, and chemicals industries came to a near halt in first quarter 2009 as economic uncertainties continued to loom across the globe.

Deal activity remained somewhat healthy in the chemicals sector, which experienced a steady pace of small and midsized deal announcements in the first quarter (58 deals with a disclosed value of at least $50 million), resulting in a 66 percent increase in overall deal value from fourth quarter 2008. The industrial manufacturing industry endured the most difficult M&A environment in the first quarter, with only 13 deal announcements, resulting in an 80 percent decline in total deal value from the same time last year.

Strategic buyers acted as the main investors in the majority of deals, as financial investors continued to shy away from deals because of tightened credit markets and a dearth of liquidity. For the most part, deal values and the average deal size declined from last year's levels, as high-priced, large deals were put on hold during the first quarter.

Anxieties over the domestic economy continued in early 2009 as interest in U.S. and North American targets declined. There were no deal announcements for U.S. targets in the metals or industrial manufacturing industries, and only one transaction in the T&L sector involved the United States. Meanwhile, North American targets dominated deal activity in the chemicals sector, accounting for two of the largest deals announced in the first quarter.

"The current financing environment has made it tremendously difficult for investors to support deals during the first quarter, as even the most well-capitalized strategic buyers are now engaging in smaller transactions, including minority stakes, divested assets, and distressed targets," said Dean Simone, U.S. industrial products leader, PricewaterhouseCoopers. "It is likely in the near future that we will continue to witness a pullback on large deals and transactions until the economy rebounds. However, we are starting to see indications of a turnaround, given the strengthening of the U.S. dollar and the passage of the federal stimulus package, so it may not be too long until we see a resurgence of M&A activity in the global industrial products sectors."

The first quarter editions of PricewaterhouseCoopers' M&A reports include a special section on the adverse effect of the struggling auto industry on the major direct and indirect suppliers in each industrial products sector. It includes executive commentary on the auto industry bailout and the potential consequences this may have for the global industrial manufacturing, T&L, metals, and chemicals industries.

According to the report, the economic stimulus bill approved by Congress and President Obama in February 2009 could mitigate some of the recessionary forces facing the industrial products sector via current and future funding of infrastructure projects. However, these industrial sectors do face both near-term and longer-term realities, including a much smaller global auto industry that is increasingly concerned with environmental efficiency.

"As the auto industry reinvents itself through this difficult period, industrial products companies must realize that less of their revenue will come from the automakers, and thus must find new ways to fill an auto industry-induced void on their income statements," added Simone. "Many companies already have taken steps to diversify into sectors with larger growth potential, such as healthcare, energy, and public sector infrastructure spending. These actions may ignite M&A activity, as auto-dependent sectors look toward strategic purchases or mergers to match their skills and capabilities to an increasingly energy- or healthcare-driven economy."

Details on each subsector M&A report follow:

Industrial manufacturing

Mergers and acquisitions in the global industrial manufacturing industry continued to be depressed during first quarter 2009, according to the PricewaterhouseCoopers LLP report Assembling value: First-quarter 2009 M&A analysis. Deal activity remained at a near stop during the first quarter, with only 13 deal announcements, a fraction of the 141 deals announced in 2008 and 206 in 2007.

On a year-over-year basis, the pace of deal activity (measured by the number of deals with a disclosed value of at least $50 million) declined significantly from previous quarters, with 13 deal announcements for this year's first quarter compared with 43 announcements during last year's first quarter. However, the first quarter's deal activity is a slight improvement from the 11 deals announced in fourth quarter 2008.

Total deal value declined 75 percent from the same time last year, with only $2 billion announced in first quarter 2009, down from $8 billion in first quarter 2008. With the absence of large deal announcements in first quarter 2009, average deal value also suffered, averaging only $126 million compared with $185 million in first quarter 2008 and $273 million in first quarter 2007.

Financial investors continued to show restraint in industrial manufacturing investments, resulting from a lack of available credit and a slowing influx of capital. Indeed, these buyers accounted for only three deals (23 percent) in first quarter 2009, a decline from 14 in first quarter 2007 and nine in first quarter 2008. Declining M&A demand has applied downward pressure on market valuations, while a need to conserve cash, weak global demand, and tight credit have discouraged strategic buyers from deal activity as well. In first quarter 2009, strategic buyers accounted for 10 deals, compared with 34 deals in first quarter 2008.

Chemicals

After a healthy deal-making environment in 2008, anxiety over the declining global economy negatively impacted the global chemicals industry in first quarter 2009, according to the PricewaterhouseCoopers LLP report, Chemical compounds: First-quarter 2009 M&A analysis. Deal volume declined significantly during the first quarter amid concerns over diminished demand and liquidity.

In first quarter 2009, 143 deals were announced, a 31 percent decline from fourth quarter 2008 and a 7 percent decrease from first quarter 2008. Furthermore, deal activity concerning transactions with a disclosed value greater than $50 million (58 deals) plummeted 55 percent compared with first quarter 2008.

Despite the decline in deal announcements, average deal size increased in 2009 to $176 million, compared with $148 million in 2008. This resulted in a quarterly increase in total deal value of 66 percent, from $6 billion in fourth quarter 2008 to $10 billion in first quarter 2009. In the first quarter, two large deals (disclosed value of at least $1 billion) were announced, contributing significantly to overall deal value.

As reported in previous quarters, strategic buyers remain the majority investors in global chemical transactions, as financial investors continue to shy away from large deals. Strategic investors accounted for more than 80 percent of deal value announced in the first quarter.

Transportation and Logistics (T&L)

Deal activity dropped significantly during first quarter 2009 in the global transportation and logistics industry, according to a report released today by PricewaterhouseCoopers LLP: Intersections: First-quarter 2009 M&A analysis. During the first quarter, 18 deals were announced at a disclosed deal value of at least $50 million each, marking a serious slowdown from fourth quarter 2008, when 43 deals were announced.

Among deals that were made, activity continued to increase among non-U.S. entities during first quarter 2009. Foreign entities made up 94 percent of deal volume for T&L targets in 2009, up from 71 percent in 2007 and 81 percent in 2008. Only one U.S. entity announced a deal during first quarter 2009.

Deal values declined significantly, from $513 million in 2008 to $159 million in the first quarter (for deals announced with a value of at least $50 million) because of the general absence of large deals. Minority stake purchases took the place of larger deals, accounting for 39 percent of deals announced during first quarter 2009, up from 30 percent of the deals announced in 2008.

Strategic investors continued to make the majority of deals for the T&L industry, accounting for more than 80 percent (15 deals) for first quarter 2009; up from approximately 60 percent in 2007 and 2008. There was an overall absence of deals in the shipping sector by financial investors during the first quarter, yet in previous quarters, financial investors have shown the most interest in shipping compared with other transportation modes.

Metals

The pace of global deal activity in the metals industry significantly declined in first quarter 2009 as falling end-market demand and weak commodity prices created a difficult operating environment, according to a report released today by PricewaterhouseCoopers LLP: Forging ahead: First-quarter 2009 M&A analysis.

During first quarter 2009, 18 deals (five completed; 13 pending or intended) with a disclosed value of at least $50 million each were announced, showing a significant decline compared with the 142 deals of similar value in 2007 and 138 in 2008. Total deal values declined sharply, with the first quarter resulting in only $12 billion in deal value announced for metals targets, far behind the pace set in 2007 ($298.2 billion) and 2008 ($78.6 billion).

While the pace of deals is showing a decline in 2009, PricewaterhouseCoopers found that their average value of metals deals during the first quarter remained similar to the average value announced in 2008. Additionally, interest in minority stake purchases increased dramatically, with deals that targeted less than 50 percent ownership making up more than 55 percent of the deals announced in first quarter 2009, up from 33 percent of deals announced in 2007 and 2008.

While overall deal activity was low during first quarter 2009, nearly all of the deals made in the metals sector came from strategic investors, similar to years past. Strategic investors accounted for 98 percent ($11.8 billion) of announced deal value during first quarter 2009, while the remaining 2 percent came from financial investors. This is consistent with deals seen by investor groups over the past two years, when strategic investors accounted for 93 percent of announced deal value in 2007 and 77 percent in 2008.

For more information and to access the reports, visit:

Assembling value: First-quarter 2009 M&A analysis www.pwc.com/manufacturing.

Chemical compounds: First-quarter 2009 M&A analysis www.pwc.com/chemicals.

Intersections: First-quarter 2009 M&A analysis www.pwc.com/transport.

Forging ahead: First-quarter 2009 M&A analysis www.pwc.com/metals.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax, and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience, and solutions to develop fresh perspectives and practical advice.

All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.


            

Coordonnées