European M&A Construction Monitor 2012
Number of acquisitions increases, deal size declines
The yearly publication Deloitte European M&A Construction Monitor provides an insight into the development of the European construction industry and the M&A deals within this sector. The main trends that characterise the market are addressed in further detail: a higher risk of defaulting on financial obligations, deleveraging strategies, sector diversification and internationalisation, and finally DBFM (Design, Build, Finance, Maintain) and PPS. Analyses have been performed based upon the data available within the market regarding M&A deals in Europe. Local Deloitte specialists have also provided valuable information with respect to the current and projected market conditions within fourteen European countries.
Based on the outcome of the European survey it is expected that the number of acquisitions in the European construction sector will increase as from this year, while in 2011 a decrease was still noticed. However at the same time, the average deal size shows a distinct decline. This trend is expected to continue going forward.
Many European construction companies are navigating through stormy weather. Significant pressure on pricing is the main reason. This pressure is due to overcapacity in the market, which in turn is a result of the limited number of construction projects, the limited availability of funding, and the low level of economic activity in the region. Hence, larger companies are now also pursuing smaller assignments. This has led to a distorted market in which smaller companies are getting into trouble and are at times not able to fulfil their financial obligations. More often, bankruptcy is becoming an actual threat. In order to lower the interest & reimbursement obligations and to improve the risk profile of the company, many companies opt to limit their loan portfolio. This goal is regularly achieved by selling assets and/or parts of the company, or by attracting additional equity (e.g. private equity).
An increased number of financially strong construction companies are looking to diversify into other industries and other countries. Not only European markets are considered in this diversification strategy, but also Asia and America are targeted. Expectations are that, already during 2012, the number of cross continental transactions will exceed the number of cross border transactions within Europe.
The Real Estate Industry Management Team of Deloitte Belgium
Jean-Paul Loozen, Belgium & EMEA Real Estate Industry Leader
Pierre-Hugues Bonnefoy, Real Estate Audit Partner
Kurt Debrier, Real Estate Tax Partner
Ivan Massin, Real Estate Indirect Taxes Director
Rik Neckebroeck, Real Estate Audit Partner
Frédéric Sohet, Real Estate Corporate Finance Partner
Elias Van Herwaarden, EMEA Service Leader, Global Location & Facility Services
Michael Van Gils, Real Estate Tax Director
Yannick De Smet, Real Estate Accountancy Senior Manager
Catherine Pauwels, Director, M&A Transaction Services