Mergermarket’s Global Industrials Trend Report: Q1 2014 suggests continued decline for deal value in the Industrials sector, with some exceptions.
The first quarter of 2014 saw M&A deal value in the Industrials sector (US$ 20.9bn) fall by 44.3% from Q4 2013 (US$ 37.5bn), despite global M&A value (US$ 623.2bn) rising 10.1% over the same period. Overall, Industrials generated just 3.4% of Q1 global M&A deal value. This represents the sector’s lowest global proportion since Q2 2009 and approximately half the deal value generated by the sector in Q4 2013.
The Q1 2014 Industrials data follows a 20.1% sector-wide year-over-year decline in M&A between 2012 and 2013. This downward trend stems mainly from the sustained slowdown in the Industrial Products and Services (IPS) sub-sector, which generates most of the sector’s overall M&A activity (US$17.3bn). The IPS sub-sector underwent an 18.3% year-over-year decline from 2012 to 2013 and by the close of Q1, generated only half the deal value (48.5%) produced in Q4 2013.
One exception to the downward trend is the Industrial Automation (IA) sub-sector, which underwent an 11.1% year-over-year increase from 2012 to 2013. The IA sub-sector experienced a surge in deal value in Q1 2014, nearly doubling its Q4 2013 deal value (US 0.7bn) to obtain its highest Q1 value (US$1.3bn) since 2011. While much of that increase stems from Renova Group’s acquisition of Octo Telematics (US$ 548m), the ongoing M&A boom in the Technology, Media, and Telecommunications sector—which accounted for nearly one third (28.5%) of global M&A activity in Q1 2014—may lead to further acquisitions of companies that centre on IA-related technologies.
The author wishes to thank Kyle Mitchell, articling student, for his assistance in preparing this legal update.