industrial spiked gear

Analysis

Industrials M&A update: Q4 2019

The industrials space has seen a year of mixed results, since defense, engineering, and construction are expected to see continued growth while aerospace and manufacturing has shown signs of contraction in growth. Also, OG&C (oil, gas, and chemical) majors are expected to continue diversifying into cleaner energy sources, while power and utilities companies are enhancing their portfolio of smart energy solutions. This industrials M&A (mergers and acquisitions) update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the industrial products industry.

Industrials trends

  • Aerospace and defense:1 While the defense sector has continued to soar, growth in the commercial aerospace sector has slowed. The defense sector has sustained its growth in 2019 as security threats have intensified, requiring governments worldwide to continue increasing their defense budgets. On the other hand, the commercial aerospace sector has experienced a decline in deliveries in 2019 due to production-related issues in certain aircraft models. Order backlog of commercial aircrafts has also decreased.
  • Engineering and construction:2 This industry grew despite cost pressures, labor shortages, and trends toward fixed-bid projects. Even with these challenges, the industry is poised to benefit from several significant opportunities in the industry, such as the US transportation and infrastructure upgrade initiative and the rise of smart city projects. To remain competitive, companies are likely to realign their business and operational processes to reflect the opportunities that innovation and technology provide.
  • Manufacturing:3 The manufacturing industry has seen a year of mixed results, as it continues to contend with a challenging global industry landscape, ongoing constraints from evolving trade and tariff uncertainties, and sustained difficulty attracting, training, and retaining talent. 2019 saw the decade-long expansion in the US economy become the longest in history; however, in recent months, the US manufacturing sector has shown signs of contraction.
  • Oil and gas:4 Despite a surge in penetration of renewables, oil and gas are likely to account for about half of the global energy mix in 2040, with a constant decline in coal use. In line with global energy trends, OG&C majors are expected to continue diversifying into cleaner energy sources, such as solar and wind energy, EV infrastructure, biofuels, and CCS technologies, while power and utilities companies are expanding their renewable capacity and enhancing their portfolio of smart energy solutions.

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References

1 Deloitte, 2020 Aerospace and Defense industry outlook, 2019, accessed January 13, 2020.

2 Deloitte, 2020 Engineering and Construction industry outlook, 2019, accessed January 13, 2020.

3 Deloitte, 2020 manufacturing industry outlook, 2019, accessed January 14, 2020.

4 Deloitte, "Future of energy: Oil and gas to remain dominant in 2040 despite rising penetration of renewables," 2019, accessed January 14, 2020.

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