US deal makers were on the acquiring end of four of the top ten deals during the first nine months of 2017, reflecting their desire to transact even in uncertain times. Executivesummary The following is an analysis of global industrial manufacturing deals with disclosed values greater than $50 million. Industrial manufacturing M&A results for Q3 2017 displayed much of the same as the previous quarter with relatively flat value and volume levels. Deal value came in at $16.5 billion while the number of deals announced were 57 compared to 55 in Q2 2017. Cross sector global and US deal volume has modestly increased for the third consecutive quarter indicating the appetite to seek out M&A plays is still active and healthy. US cross-sector deal volume is substantially up for the first nine months of 2017 vs. 2016 which correlates with the double digit volume increases seen in the industrial manufacturing sector over the same period. Although there is an eagerness to investment in technology and innovation, industrial manufacturing remains somewhat risk-averse, especially as it relates to targeting larger size investments. As highlighted in our second quarter report, the slowness of implementing trade, regulatory and tax reform in the US and the uncertainty of its implications continues to be a barrier to some. Conversely, others have accepted its existence and shifted their investment strategies to mitigate against these uncertainties. • Deal value for the first nine months of 2017 was $52.6 billion, 18% lower than the first nine months of 2016, while deal volume saw an increase from 150 deals to 170 deals from the first nine months of 2017 vs. 2016. • Deal value for Q3 2017 was $16.5 billion compared with $16 billion in Q2 2017. Deal volume increased slightly from 55 deals in Q2 2017 to 57 deals in Q3 2017, a 4% increase. • The average deal size in Q3 2017 was 21% lower than the 2017 YTD quarterly average of $367 million, indicating a preference towards smaller transactions. • There were four megadeals (deals greater than $1 billion) in Q3 2017 with an aggregate transaction value of $7.7 billion. Three of the deals were cross- border deals. • The largest deal announced in Q3 2017 was the Swiss firm ABB acquisition of US-based GE Industrial Solutions for $2.6 billion. • Asia and Oceania remains the most active region, accounting for 56% and 35% of M&A deal volume and value during Q3 2017. • There were 14 megadeals announced in the first nine months of 2017 ($24.3 billion) compared to 17 in the same period of 2016 ($55.9 billion). • Seven of the top ten megadeals in the first nine months of 2017 include China or the US as a part of the transaction vs. four over the same period in 2016. Key trends/highlights PwC Deals Global industrial manufacturing M&A deals insights Q3 2017 Optimize deals Source: Thomson Reuters and other publicly available sources Value by the numbers 3% Q3 2017 vs. Q2 2017 2017 YTD vs. 2016 YTD $16.5B 18% Q3 2017 Volume by the numbers 2017 YTD vs. 2016 YTD 57 Q3 2017 vs. Q2 2017 4% 13% Q3 2017 — Paul Elie, US Industrial Manufacturing Deals leader Global Industrial Manufacturing Deals Insights Q3 2017 Update 1
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US deal makers were on the acquiring end of four of the top ten deals during the first nine months of 2017, reflecting their desire to transact even in uncertain times.
Executive summary
The following is an analysis of global industrial manufacturing deals with disclosed values greater than $50 million.
Industrial manufacturing M&A results for Q3 2017 displayed much of the same as the previous quarter with relatively flat value and volume levels. Deal value came in at $16.5 billion while the number of deals announced were 57 compared to 55 in Q2 2017.
Cross sector global and US deal volume has modestly increased for the third consecutive quarter indicating the appetite to seek out M&A plays is still active and healthy. US cross-sector deal volume is substantially up for the first nine months of 2017 vs. 2016 which correlates with the double digit volume increases seen in the industrial manufacturing sector over the same period.
Although there is an eagerness to investment in technology and innovation, industrial manufacturing remains somewhat risk-averse, especially as it relates to targeting larger size investments. As highlighted in our second quarter report, the slowness of implementing trade, regulatory and tax reform in the US and the uncertainty of its implications continues to be a barrier to some. Conversely, others have accepted its existence and shifted their investment strategies to mitigate against these uncertainties.
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• Deal value for the first nine months of 2017 was $52.6 billion, 18% lower than the first nine months of 2016, while deal volume saw an increase from 150 deals to 170 deals from the first nine months of 2017 vs. 2016.
• Deal value for Q3 2017 was $16.5 billion compared with $16 billion in Q2 2017. Deal volume increased slightly from 55 deals in Q2 2017 to 57 deals in Q3 2017, a 4% increase.
• The average deal size in Q3 2017 was 21% lower than the 2017 YTD quarterly average of $367 million, indicating a preference towards smaller transactions.
• There were four megadeals (deals greater than $1 billion) in Q3 2017 with an aggregate transaction value of $7.7 billion. Three of the deals were cross-border deals.
• The largest deal announced in Q3 2017 was the Swiss firm ABB acquisition of US-based GE Industrial Solutions for $2.6 billion.
• Asia and Oceania remains the most active region, accounting for 56% and 35% of M&A deal volume and value during Q3 2017.
• There were 14 megadeals announced in the first nine months of 2017 ($24.3 billion) compared to 17 in the same period of 2016 ($55.9 billion).
• Seven of the top ten megadeals in the first nine months of 2017 include China or the US as a part of the transaction vs. four over the same period in 2016.
Key trends/highlights
PwC DealsGlobal industrial manufacturing M&Adeals insights Q3 2017
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Source: Thomson Reuters and other publicly available sources
Value by the numbers
3%
Q3 2017 vs.
Q2 2017
2017 YTD vs.
2016 YTD
$16.5B 18%
Q3 2017
Volume by the numbers
2017 YTDvs.
2016 YTD
57
Q3 2017vs.
Q2 2017
4%13%Q3 2017
— Paul Elie,US Industrial Manufacturing Deals leader
Global Industrial Manufacturing
Deals InsightsQ3 2017 Update 1
Optimize deals
0
10
20
30
40
IndustrialMachinery
FabricatedMetal Products
Rubberand Plastic Products
Electronicand Electrical Equipment
Miscellaneous IMand Other
0
5
10
15
20
25
30
Highlights of Q3 2017 deal activity
Source: Thomson Reuters and other publicly available sources
Deal value ($B)
Deal volume
Source: Thomson Reuters and other publicly available sources
Largest transactionIn September, Swiss-based technology leader ABB Ltd. announced its intention to acquire GE’s global industrial solutions business for $2.6 billion. GE Industrial Solutions provides circuit breakers, transformers and power systems equipment for data centers and oil and gas installations.
Deal activityTotal deal value this quarter was $16.5 billion, 3% higher than last quarter. Year to date, deal value was 18% lower than last year due to a more challenging environment for acquisitions as well as the JCI/Tyco megadeal of $22.6 billion.
There were 57 deals this quarter, 4% more than last quarter. Deal volume is 13% higher than the first nine months of 2016.
Source: Thomson Reuters and other publicly available sources
MegadealsThere were four deals with total aggregate transaction value of $7.7 billion in Q2 2017. Megadeals accounted for 46.5% of total deal value for the quarter.
Sector category analysisThe Industrial Machinery category continues to account for the majority of total deal activity. The category brought in 44% of all deals in the sector, a contribution that appears to be increasing over the last year. A significant transaction in this category included the merger between China National Building Material and China National Materials for $1.95 billion.
Global IM M&A deal volume and value
Global IM M&A deals by disclosed value
$28 $18 $29 $20 $19 $33 $12 $19 $30 $20 $16 $17
70
5661
69 67
4549
56
68
58 55 57
0
10
20
30
40
50
60
70
80
0
5
10
15
20
25
30
35
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Dea
l vol
ume
Dis
clos
ed d
eal v
alue
($b
n)
Disclosed deal value Deal volume (R axis)
$394$325
$471
$297
$286
$735
$248 $332
$443
$345$292 $290
0
100
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0
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350
4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17
Ave
rage
dis
clos
ed d
eal v
alue
($m
n)
Dea
l vol
ume
of d
iscl
osed
dea
l val
ue
<$50 mn $50 mn to $250 mn$250 mn to $1,000 mn >$1,000 mnAverage deal size (R-axis)
4Q16
1Q17
2Q17
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
3Q17
4Q16
1Q17
2Q17
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
3Q17
4Q16
1Q17
2Q17
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
3Q17
4Q16
1Q17
2Q17
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
3Q17
4Q16
1Q17
2Q17
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
3Q17
Global Industrial Manufacturing
Deals InsightsQ3 2017 Update 2
Optimize deals
14
14
10
822
715
515
530
37 614
417
13
14
610
613
4
Strategic investors Financial investors
0
5
10
15
20
25
30
35
43
27
30
26
33
28
45
24
42
25
30
15
29
20
44
12
43
25
39
19
35
20
37
20
0
20
40
60
Deal value ($B)
Key trends and insights
Source: Thomson Reuters and other publicly available sources
Deal volume
32
%
34
%
34
%
63
%
76
%
21
%
54
%
38
%
56
%
38
%
60
%
36
%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
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1Q
17
2Q
17
3Q
17
Share of deal value by acquirer region
Asia and Oceania North America South America
UK and Eurozone Europe ex-UK and Eurozone Africa/Undisclosed
51
%
52
%
69
%
68
%
76
%
60
%
57
%
57
%
59
%
55
%
56
%
56
%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
Share of deal volume by acquirer region
Asia and Oceania North America South America
UK and Eurozone Europe ex-UK and Eurozone Africa/Undisclosed
Financial vs. strategic investorsStrategic investors continue to account for the largest share of deal activity in the sector with $12.9 billion of value and 27 deals for the quarter. As shown below, this reflects 78% of value and 65% of volume. Financial investor deal value for the first nine months of 2017 was $15.9 billion vs. $12.8 billion over the same period in 2016. This contribution is consistent with previous quarters and implies the market is more attractive for companies who can create synergies.
Regional analysisThe Asia and Oceania region remains the most active in terms of volume for the 12th consecutive quarter. In terms of value for the quarter, the region’s share of the wallet declined to 36% as the $2.6 billion acquisition of GE Industrial Solutions drove an increase in North America value to 32%. As shown on the following page, North America had the largest amount of inbound deals (14) with aggregate deal value of $9.9 billion.
22%
35%
0%
10%
20%
30%
40%
50%
60%
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
Financial investor share of M&A activity
Financial buyer share of total value
Financial buyer share of total volume
4Q
16
1Q
17
2Q
17
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
3Q
17
4Q
16
1Q
17
2Q
17
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
3Q
17
Global Industrial Manufacturing
Deals InsightsQ3 2017 Update 3
Optimize dealsKey trends and insights
Global Industrial Manufacturing
Deals InsightsQ3 2017 Update 4
Regional analysis (continued)
Industrial manufacturing deals by region YTD 2017
Source: Thomson Reuters and other publicly available sources
Europe ex-UK and EurozoneLocal: 4 deals, $0.9 billionInbound: 1 deal, $0.1 billionOutbound: 4 deals, $2.8 billion
South AmericaLocal: 0 dealsInbound: 2 deals, $0.2 billionOutbound: 1 deal, $0.1 billion
UK and EurozoneLocal: 12 deals, $2.3 billionInbound: 10 deals, $3.8 billionOutbound: 8 deals, $5.9 billion Asia and Oceania
Local: 85 deals, $20.3 billionInbound: 11 deals, $3.6 billionOutbound: 10 deals, $2.9 billion
North AmericaLocal: 31 deals, $11.7 billionInbound: 14 deals, $9.9 billionOutbound: 10 deals, $5.2 billion
Africa/UndisclosedLocal: 0 dealsInbound: 0 dealsOutbound: 5 deals, $0.5 billion
Source: Thomson Reuters and other publicly available sources
50
%
52
%
69
%
64
%
70
%
60
%
53
%
59
%
57
%
55
%
49
%
65
%
0%
20%
40%
60%
80%
100%
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
Share of disclosed deal volume by target region
Asia and Oceania North America South America
UK and Eurozone Europe ex-UK and Eurozone Africa/Undisclosed
32
%
34
%
34
%
58
%
66
%
19
%
52
%
48
%
54
%
37
%
48
%
53
%
0%
20%
40%
60%
80%
100%
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
Share of disclosed deal value by target region
Asia and Oceania North America South America
UK and Eurozone Europe ex-UK and Eurozone Africa/Undisclosed
Steady pace for remainder of 2017
Deal value in the industrial manufacturing sector continues to be constrained as deal makers are still wary of the current investment playing field. Many of the same political uncertainties, particularly in the US and Europe, linger and have been the primary influence in declining average deal size over the last three quarters of 2017.
For foreign investors looking to capitalize on attractive businesses in the US there are positive and negative factors simultaneously working against one another. On the positive side, the Federal Reserve sees confidence in the US economy and plans to gradually continue to increase the federal funds rate. However, negative influencing the deals environment is the current administration’s inability to progress its agenda related to tax, trade, and healthcare.
We project the industry will close out the year in similar fashion to each of the three quarters of 2017 unless we see a catalyst event in the market such as tax reform.
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Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category
01/25/16 Tyco International PLC Ireland-Rep Johnson Controls Inc. United States Completed 22,660 Industrial Machinery
11/22/16 Calsonic Kansei Corp. Japan CK Holdings Co. Ltd. Japan Completed 4,404 Industrial Machinery
11/15/16Hyundai Heavy Industries Co. Ltd.-Robot & Investment Business
South Korea Shareholders South Korea Completed 4,207 Industrial Machinery
10/07/16 Atotech BV Germany Investor Group United States Completed 3,200 Fabricated Metal Products
08/18/16 Pentair PLC-Valves & Controls Business Switzerland Emerson Electric Co. United States Completed 3,150 Fabricated Metal Products
06/16/16 Hermes Microvision Inc. Taiwan Ai Pu Ssu Lung Co. Ltd. Taiwan Completed 3,093 Industrial Machinery
10/12/16 Newell Brands Inc.-Tools Business United States Stanley Black & Decker Inc. United States Completed 1,950 Industrial Machinery
09/19/16China High Speed Transmission Equipment Group Co. Ltd.
Hong Kong Five Seasons XVI Ltd. Hong Kong Completed 1,706 Industrial Machinery
10/11/16 LM Wind Power Holding A/S Denmark GE Global Holdings Denmark ApS Denmark Completed 1,650 Industrial Machinery
07/28/16 Keter Plastics Ltd. Israel Investor Group United Kingdom Completed 1,529 Rubber and Plastic Products
Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category
03/08/17 GE Water & Process Technologies Inc. United States Investor Group France Completed 3,381 Industrial Machinery
09/25/17 GE Industrial Solutions Inc. United States ABB Ltd. Switzerland Pending 2,600Electronic and Electrical
Equipment
02/07/17 Mauser Group NV Germany BWAY Corp. United States Completed 2,300 Rubber and Plastic Products
03/16/17 Scott Technologies Inc. United States 3M Co. United States Pending 2,000 Industrial Machinery
09/08/17 China National Materials Co. Ltd. ChinaChina National Building Material Co. Ltd.
China Pending 1,950 Industrial Machinery
08/07/17 Netafim Ltd. Israel Mexichem SAB de CV Mexico Pending 1,895 Industrial Machinery
05/21/17 Changsha Zoomlion Environmental Industry Co. Ltd. China Investor Group China Completed 1,685 Industrial Machinery
06/01/17 Ningbo Dongfang Yisheng Investment Co. Ltd. China Yinyi Real Estate Co. Ltd. China Pending 1,371 Industrial Machinery
01/13/17 Hitachi Koki Co. Ltd. Japan HK Holdings Co. Ltd. Japan Completed 1,283 Industrial Machinery
07/27/17 ASCO Power Technologies LP United States Schneider Electric SE France Pending 1,250Electronic and Electrical
Equipment
Key trends and insights
Top 10 industrial manufacturing deals 2017 YTD
Top 10 industrial manufacturing deals 2016
Top 10 industrial manufacturing deals 2015Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category
05/13/15 Pall Corp. United States Danaher Corp. United States Completed 13,700 Industrial Machinery
09/01/15 China Shipbuilding Industry Corp.-Assets China Fengfan Stock Co. Ltd. China Completed 5,189 Industrial Machinery
10/15/15Shandong Iron & Steel Co. Ltd.-Jinan Branch Assets
China Shandong Iron & Steel Group Co. Ltd. China Pending 2,020 Fabricated Metal Products
01/29/15 The Manitowoc Co. Inc.-Foodservice Business United States Shareholders United States Completed 1,890 Industrial Machinery
12/03/15 China Railway Group Ltd.-Assets China China Railway Erju Co. Ltd. China Completed 1,847 Fabricated Metal Products
12/21/15 Hussmann Parent Inc. United States Panasonic Corp. Japan Completed 1,545 Industrial Machinery
03/11/15 Domino Printing Sciences PLC United Kingdom Brother Industries Ltd. Japan Completed 1,539 Industrial Machinery
07/13/15 Waddington Group Inc. United States Jarden Corp. United States Completed 1,350 Rubber and Plastic Products
06/23/15 Zoje Resources Investment Co. Ltd. China Investor Group China Pending 1,320 Industrial Machinery
04/30/15 Dorma Holding GmbH + Co. KGaA Germany Kaba Holding AG Switzerland Completed 1,289 Fabricated Metal Products
* In US$ millionsSource: Thomson Reuters and other publicly available sources
Global Industrial Manufacturing
Deals InsightsQ3 2017 Update 5
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Authors
Paul ElieUS Industrial Manufacturing Deals leaderDetroit, [email protected](313) 394 3517
Bobby BonoUS Industrial Manufacturing leaderCharlotte, North [email protected](704) 350 7993
Barry MisthalGlobal Industrial Manufacturing leaderLausanne, [email protected]+41 58 792 8239
About PwC
© 2017 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
About thedataThe information presented in this report is an analysis of deals in the global industrial manufacturing greater than $50 million. Deal information was sourced from Thomson Reuters and includes sector deals for which targets have an SIC code that falls into one of the 111 industrial manufacturing industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to industrial manufacturing or incorporate relevant transactions that were omitted from the SIC industry codes.
This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between October 1, 2014 and September 30, 2017, with a deal status of completed, partially completed, pending, pending regulatory and pending completion and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.
Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.
Smart deal makers are perceptive enough to see value others have missed, flexible enough to adjust for the unexpected, aggressive enough to win favorable terms in a competitive environment, and circumspect enough to envision the challenges they will face from the moment the contract is signed. But in a business environment where information can quickly overwhelm, the smartest deal makers look to experienced advisors to help them fashion a deal that works.
PwC’s Deals group can advise industrial manufacturing companies and industrial manufacturing-focused private equity firms on key M&A decisions, from identifying acquisition or divestiture candidates and performing detailed buy-side diligence, to developing strategies for capturing post-deal profits and exiting a deal through a sale, carve-out, or IPO. With more than 9,800 deals professionals in 75 countries, we can deploy seasoned teams that combine industrial manufacturing industry skills with local market knowledge virtually anywhere and everywhere your company operates or executes transactions.
Although every deal is unique, most will benefit from the broad experience we bring to delivering strategic M&A advice, due diligence, transaction structuring, M&A tax, merger integration, valuation, and post-deal services.
In short, we offer integrated solutions, tailored to your particular deal situation and designed to help you extract peak value within your risk profile. Whether your focus is deploying capital through an acquisition or joint venture, raising capital through an IPO or private placement, or harvesting an investment through the divesture process, we can help.
For more information about M&A and related services in the global industrial manufacturing industry, please visit www.pwc.com/us/deals or www.pwc.com/us
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