2017 Industrials & Chemicals M&A report by Mergermarket
Mergermarket has released its ‘2017 Industrials and Chemicals report.’ The main findings are as follows:
Despite contributing no deals to the year’s top ten, Asia Pacific (excluding Japan) maintained a steady amount of investment, with 765 deals valued at US$88.7 billion taking place, slightly down from 2016. Asian activity was largely driven by domestic investment. The region accounted for 22.6% of the sector’s activity, 4.1% higher than in 2016. Asian activity was largely driven by domestic investment.
China’s crack down on large deals being carried out in foreign territories led to outbound activity plummeting 85.7% in value. In the last 12 months 126 deals were announced worth US$11.8 billion, falling well short of 2016’s US$82 billionover 148 deals. Yet a push to transform its economy from a low-cost manufacturer into an economy powered by high-tech products and services, in fields such as robotics, industrial products and electrification, could see a return to foreign investment in specific areas.
Mirroring that of other sectors’ performances in 2017, Industrials & Chemicals (I&C) failed to reach the heights it is more commonly associated with as deal value slumped 26.8% year-on-year to reach US$391.9 billion generated across 3,435 deals. It was responsible for 12.4% of global M&A deal value, suffering a dip from 2016’s 16.4% all-time high. Deal count accounted for 18.6%. Of those, US$196 billion was spent on 1,297 cross border deals, the third largest percentage (50.2%) of I&C deal value on Mergermarket record (since 2001), only beaten by 2016 (56.0%) and 2007 (55.3%).
After a sluggish start to 2017, seven of the sector’s top ten deals took place during H2 worth a combined US$65.8 billion, accounting for 16.8% of total I&C deal value. Nine of the top ten deals involved either European or US-based companies. The drop compared to previous years can be attributed to a lack of US$10 billion-plus mega deals, with only three recorded in the last 12 months versus seven and four such deals occurring in 2016 and 2015 respectively. The year’s largest deal was Praxair and Linde’s US$45.5 billion merger announced in June.
European activity reached its second highest post-crisis value despite suffering an 11% yearon-year dip with US$147.4 billion trading across 1,459 deals, compared to 2016 (US$165.7 billion; 1,487 deals). The figure was almost equally split between inbound and intra-European deals, where investment within Europe landed at US$64.5 billion (43.8%). The continent captured 37.6% of the year’s total I&C deal value versus 2016’s 31%. Deal count in 2017 was largely driven by intra-European activity, accounting for 78.2%. European deals focused greatly on right sizing, with Aptiv’s demerger of its powertrain business, Delphi Technology, a deal worth US$4.6 billion which allowed the company to unlock potential value and gave the opportunity for Aptiv to focus on the future of Automotive mobility. Across the Atlantic, the US saw 886 deals in which US$107.3 billion changed hands, a 48.7% decline in value despite eight more deals compared to 2016’s US$209.1 billion across 878 transactions. It was also the lowest value since 2013 (US$82 billion).
Consequently, the US share of activity stood at 27.4%, around 10 percentage points lower than the average US share and an all-time low on Mergermaket record. Inbound activity (US$27.9 billion; 186 deals) saw the lowest deal value since 2013 (US$17.6 billion) and with 38 deals less than 2016. While the domestic deal count – 700 deals; US$ 79.4 billion – increased by 46 deals and was the highest count since 2014 (730 deals). The US was involved in half of the top ten deals leading its outbound activity (US$101.6 billion; 281 deals), to increase 53.6% by deal value compared to 2016.