The manufacturing sector witnessed mergers and acquisitions worth $18.6 billion globally in the April-June quarter of 2011, a 90 per cent jump vis-a-vis the year-ago period, according to global consultancy firm PwC.Domestic deals across all regions globally led deal activity, with North America contributing 13 deals and Asia and Oceania, BRIC countries (Brazil, Russia, India and China) and Europe contributing 10 deals each.
India and Russia also present great opportunities for M&A deals in the manufacturing sector, the report said, though it cautioned that companies need to be aware that incidents of corruption and bribery are a significant concern when doing business in these markets.
According to the report, in the second quarter of 2011, there were 46 deals worth more than $50 million, with a total deal value of $18.6 billion, compared to 33 deals worth $9.8 billion in the second quarter of 2010.
"The maturity of the industry, a fairly high market concentration and favorable deal valuations were factors that drove and will continue to drive deal activity in the industrial manufacturing industry.
"In the near term, continuous global economic growth, fuelled by emerging markets, greater capital availability and more cash on balance sheets, should continue to aid strong deal activity in the industrial manufacturing sector," PwC Global Industrial Manufacturing
Leader Barry Misthal said.
During the quarter under review, US-focused transactions dominated M&A activity, with 19 deals worth $12.3 billion accounting for 41 per cent of the overall deal volume and 66 per cent of total deal value.
"North America and the UK and Eurozone are expected to continue to make significant contributions to deal activity as companies within those regions strive to generate growth and greater returns.
"At the same time, due to greater expected growth opportunities and a stronger economic recovery, companies in Asian markets, especially in China, are likely to seek consolidation in their own local markets," Misthal added.
The report said that BRIC countries also experienced strong deal activity in the second quarter of 2011, with 10 deals, while China contributed eight deals worth $2.25 billion.
It further said that transactions in China are likely to increase as investors seek opportunities for greater returns.
India and Russia also present great opportunities to foreign companies.
"Companies need to be aware that incidents of corruption and bribery are of significant concern when doing business in emerging markets such as India, Brazil, Mexico, Russia, Indonesia and Turkey.
"In fact, the rate of bribery and corruption in the industrial manufacturing industry has increased sharply in recent years and with the uptick in deal activities, companies need to mitigate the related risks," Misthal added.
