Mergers and acquisitions worth more than $1 billion surged in the fourth quarter of 2013, according to a series of quarterly M&A reports from PwC US. This helped drive total deal value across several IP sectors, including industrial manufacturing, metals and transportation & logistics.
“Worldwide business sentiment continued to improve,” said Robert McCutcheon, U.S. industrial products leader, PwC. “Despite a recent rise in volatility stemming from instability in several emerging markets and a potential slowdown in China, we may see a positive deal momentum continue in 2014. As the overall global economic recovery continues to take hold and more established markets transition from stabilization to growth, strategic and financial investors in the IP space will likely look to pursue inorganic opportunities to expand their footprints, fuel innovation and integrate technological know-how to better position their assets for the future.”
Across the entire IP industry, there were 216 transactions worth $50 million or more, totaling $83.6 billion in the fourth quarter of 2013, compared to 181 deals and $65.3 billion in total value during the previous quarter. Transportation & logistics M&A activity in the fourth quarter was a significant driver of deal volume and value among the IP sectors, representing 66 transactions worth $50 million or more totaling $23.2 billion, compared to 42 deals worth $10.7 billion in the third quarter of 2013. For the full year of 2013, there were 726 transactions worth $50 million or more, totaling $257.8 billion, down from 836 deals and $353.3 billion in total value during 2012.
Infrastructure targets have accounted for the majority of mega deals in transportation (worth $1 billion or more) in the fourth quarter and full year of 2013. In particular, interest in airport and port assets has contributed to high median valuations for all 2013 announcements.
“With U.S. airline consolidation mostly complete, further activity among airlines will likely focus more on cross-border minority stakes and antitrust immunity agreements,” said Jonathan Kletzel, U.S. transportation and logistics leader for PwC. “Trucking and logistics are a more fragmented part of the sector and appear ripe for consolidation, and shipping may experience increased activity through alliances and vessel sharing agreements.”
There was a sequential increase in mega deals across several IP sectors during the fourth quarter of 2013, with a total of 20 mega deals worth $38.1 billion in the fourth quarter of 2013. The chemicals industry accounted for six mega deals valued at $10.7 billion in the fourth quarter of 2013, compared to only one mega deal worth $1.3 billion in the third quarter. The metals sector also saw a substantial spike in mega deals, with five mega transactions valued at $12 billion during the fourth quarter, compared to one mega deal worth $1.3 billion in the third quarter.
Local deals continued to drive M&A activity in the fourth quarter with Asia and Oceana being most active, recording 85 deals worth more than $50 million with a total value of $25.9 billion compared to 60 local deals and a total value of $14.5 billion in the previous quarter. However, there was also an uptick in North American local deal activity in the fourth quarter of 2013 with 50 deals worth $50 million or more totaling $19.5 billion, up from 39 deals with a total value of $11.1billion from the third quarter.
“We are continuing to see a moderately improved climate in the U.S. for deal making given the increasing attractiveness of the domestic manufacturing sector,” said McCutcheon. “This trend is in line with the results of our most recent Manufacturing Barometer survey, which showed sequential and year-over-year gains in sentiment among U.S. industrial manufacturers regarding the prospects of the domestic economy. Our Barometer also pointed out that the expansion into new markets abroad increased citing plans for new facilities abroad. We expect this to be a continued trend among IP companies for the longer term.”