The Value of Mergers and Acquisitions Targeting Industrials Companies

In total there were 12,089 deals worth a combined USD 764,172 million announced during the second half of 2015, according to Zephyr, the M&A database published by Bureau van Dijk. In terms of value this represents a 7 per cent increase on H1 2015, when USD 714,182 million was invested in industrials companies.

By contrast, volume actually declined from 12,223 to 12,089 over the same timeframe. 2016 has gotten off to a fairly slow start; in the first three months of this year USD 264,287 million has been invested across 4,684 transactions. If the first quarter is a sign of things to come H1 2016 is unlikely to be a record breaker and will probably bring to an end two consecutive six month periods of increasing values. The result is hardly surprising as 2016 has been fairly quiet in terms of M&A activity across the board so far. Zephyr’s Global Q1 2016 report shows dealmaking of USD 861,749 million across 20,040 deals worldwide in the first three months of the year, marking a decline on both fronts from Q4 2015 and Q1 2015.

Despite the fact that 2016 has not been a recordbreaker thus far, either globally or within the industrials segment, the latter has actually seen a few sizable transactions signed off. All of the year’s top ten deals to date were worth over USD 3,000 million, while one broke the USD 40,000 million barrier. This was ChemChina’s USD 43,000 million agreement to acquire Swiss agricultural pesticides and fertilisers maker Syngenta via its CNAC Saturn (NL) subsidiary. This was followed by a transaction worth USD 11,300 million as the Sherwin-Williams Company agreed to buy Minneapolis-headquartered paint, coatings and coating intermediates manufacturer the Valspar Corporation. Third place was taken by a deal worth USD 5,729 million as Anhui Water Resources Development Co signed on the dotted line to take over Anhui Construction Engineering Group Co. If transactions of similar sizes can continue to be announced between now and the end of June, there is still hope that dealmaking can reach similar levels to those recorded in 2016.

A number of world regions have been targeted in industrials deals worth a significant amount in 2016 to date. The most valuable region is the Far East and Central Asia, which has received investment of USD 114,241 million, placing it well ahead of second-placed Western Europe with USD 75,817 million. North America was third with USD 53,725 million. Despite the gulf between these regional values, the three regions were actually targeted in a very similar number of deals; Far East and Central Asia topped the rankings with 1,621, followed by Western Europe with 1,419 and North America with 1,000. The Far East and Central Asia’s impressive value result is not surprising given that companies in the region were targeted in four of the quarter’s ten largest transactions. The most valuable of these was the aforementioned Anhui Construction Engineering Group Co deal, while others targeted in high value deals include CITIC Real Estate, Liaoning Zhongwang Group and Inotera Memories. The USD 75,817 invested in Western European industrials firms was significantly boosted by the USD 43,000 million Syngenta deal, which was the largest deal signed off worldwide across all sectors in Q1 2016.

Although 2016 has not exactly sprinted out of the blocks in terms of deal activity in the industrials sector, there is every chance that a few more deals on a similar scale to those mentioned could be announced over the coming months. This would undoubtedly have a considerable effect on overall results for the sector and could even push results closer to the levels recorded throughout 2016. However, it is worth noting that 2016 hit record highs in terms of dealmaking worldwide and will likely prove a hard act to follow.

Company: Bureau van Dijk
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