Despite the worldwide recession, stimulus funding and increasing PPP activity are expected to drive M&A transactions in the global infrastructure construction sector, according to a report recently issued by M&A International Inc., the worlds largest independent M&A alliance.

The $7.5 trillion construction and engineering sector was acutely affected by the global recession with both revenue growth and mergers and acquisitions (M&A) activity declining in 2008 and again in 2009. According to the M&A International report, overall deal values in the sector were down by more than 60% compared to 2007 due to the credit freeze, high debt exposure, an illiquid asset base in a falling market and increased costs of funding.

However, the severity of the financial crisis was mitigated by a strong fiscal response in many developed countries. Stimulus spending has been largely directed towards infrastructure projects (given their higher multiplier effect), thus providing vital sector support. This substantial government spending has created a backlog of infrastructure projects in several key developed countries, exerting pressure on the current supply chain and requiring construction companies in turn to enter into mergers and acquisitions (M&A), joint ventures or strategic alliances. This trend is set to continue with $2 trillion estimated to be required globally over the next 20 years, according to both Booz Allen Hamilton and the World Economic Forum.

Public-private partnerships

The freezing of credit markets during the recession has made companies less reliant on debt capital and international project finance loan markets. This situation has resulted in the development of a series of creative financing solutions in which private investors assume a greater role, a development partly driven by a desire to optimise tax efficiency of investment portfolios. Public-private partnerships (PPPs) have become increasingly popular in Europe, Canada, Australia and, more recently, in other Asia Pacific regions. These arrangements have provided significant support for governments in meeting growing demands for finance without exerting undue pressure on public finances.

Further opportunities for PPP-based private sector participation, especially in the US and China, are predicted, which will in turn stimulate greater M&A activity. Both investors and creditors have increased their interest in Greenfield assets in emerging markets in anticipation of record infrastructure development in such areas.

Opportunities for acquisition-led corporate expansion

Large headline infrastructure deals are being replaced by smaller transactions. With the recession depressing company valuations and the economic recovery becoming more widespread, especially in the US and Europe, the report foresees increasing opportunities for acquisition-led corporate expansion over the next 12 months.

Head of M&A International Inc.s Construction & Engineering Services Group, Bryan Livingston, commented: "As an asset class, the infrastructure sector has performed relatively satisfactorily during the recession, demonstrating resilient fundamentals driving infrastructure demand and investments. In fact, the recession has forced markets to refocus on redressing the deficit between supply and demand of infrastructure by directing investments towards either building new or maintaining existing infrastructure facilities.

Download the full report (PDF, 0.8MB).

About M&A International Inc.

M&A International Inc. offers the unparalleled resources of 43 independently-owned merger and acquisition specialists and investment banking firms in 41 countries in the Americas, Europe and the Asia-Pacific region.

Member firms work seamlessly with clients to originate and execute domestic and cross-border M&A deals in the mid-market sector.

For further information, please visit www.mergers.net

About IBI Corporate Finance

IBI Corporate Finance is Ireland’s leading corporate finance adviser, providing expert, independent advice. It acts for public, private and semi-state companies covering a wide spectrum of domestic and international transactions.

IBI Corporate Finance is a wholly-owned subsidiary of the Bank of Ireland Group and is the exclusive Irish member of M&A International Inc.

A paradigm shift in world energy markets towards renewable portfolios is leading to a record high in mergers and acquisitions (M&A) activity in the renewable energy space, according to a report recently issued by M&A International Inc., the worlds largest independent M&A alliance.

Renewable energy accounted for 4.4% of global energy production in 2008. However, in 2009, power generation investment in alternative energy exceeded investments in traditional fossil-fuel powered generation for the second consecutive year. To benefit from the growing importance of renewable energy, industry players have actively increased their renewable portfolios using M&A to buy capacity and integrate horizontally and vertically. This is evidenced by a 19% compound annual growth in renewable energy M&A since 2007.

Pure-play alternative energy companies have emerged as the leading deal-makers, accounting for 40% of the M&A deal volume between 2007 and 2009. Wind energy has been the most active sector, accounting for the majority of both deal volume (66%) and deal value (77%).

Sustainable businesses

Future M&A activity within the sector is expected to be largely policy-driven. While large traditional power generators will need to expand their renewables footprint in order to meet their emission-reduction targets, pure-play generators see an opportunity to build sustainable businesses with government support via subsidies and incentives.

The M&A International report predicts that M&A activity will accelerate across the value chain, from manufacturing to service to maintenance, and will create sustainable alternative energy companies that thrive with much reduced government support.

Head of M&A International Inc.s Energy Group, Paul Puri, commented: "The increasing marginal cost of hydrocarbon production together with technological improvements within the sector will significantly improve the economic case for alternative energy. This, combined with increased regulatory support and governmental incentives, will bolster the case for alternative energy investment."

Download the full report (PDF, 2.4MB).

About M&A International Inc.

M&A International Inc. offers the unparalleled resources of 43 independently-owned merger and acquisition specialists and investment banking firms in 41 countries in the Americas, Europe and the Asia-Pacific region.

Member firms work seamlessly with clients to originate and execute domestic and cross-border M&A deals in the mid-market sector.

For further information, please visit www.mergers.net

About IBI Corporate Finance

IBI Corporate Finance is Ireland’s leading corporate finance adviser, providing expert, independent advice. It acts for public, private and semi-state companies covering a wide spectrum of domestic and international transactions.

IBI Corporate Finance is a wholly-owned subsidiary of the Bank of Ireland Group and is the exclusive Irish member of M&A International Inc.

Pictured at the Enterprise Ireland workshop left to right are Brano Perkovich, VP, Technology Investment Banking, EMEA, Barclays Capital; Liam Nagle, Group Chief Executive Officer, SISK Group; Paul Raleigh, Managing Partner, Grant Thornton; Ron Bolger, Principal, Ely Capital; Frank Ryan, Chief Executive Officer, Enterprise Ireland; Ted Webb, Joint Managing Director, IBI Corporate Finance; and Padraic Clarke, Finance Director, Creganna Tactx Medical.

IBI Corporate Finance Joint Managing Director, Ted Webb, took part in a panel of experienced practitioners who shared their insights into acquisitions with a select group of fast-growing companies at a recent workshop organised by Enterprise Ireland. The panel included CEOs of companies who have recently made acquisitions and a selection of expert advisers.

The workshop focused on the challenges of integration and implementation, the due diligence process, valuations and raising finance in the current market and the role of corporate advisers. The expert panel drew on a number of real-life case studies as part of the interactive workshop.

Download Ted Webbs presentation at the workshop (PDF, 1.5MB).

IBI Corporate Finance has been ranked as the No. 1 financial adviser in Ireland in the annual review of international mergers and acquisitions activity by specialist M&A publisher, mergermarket. This is the fifth successive year that IBI has been ranked No. 1.

IBI topped the league table for the number of transactions on which it advised with a total of 10 qualifying deals in 2009. It also advised on the highest value of deals in the Irish market with a cumulative deal value of US$1,168m for 2009. The company was also ranked top in 2008, 2007, 2006 and 2005.

Further consolidation expected in 2010

Commenting on the announcement, Roisin Brennan, IBI Executive Chairman, said: "We are delighted that the leading position of IBI Corporate Finance in the Irish corporate finance market has been reinforced by these statistics. While economic and financial conditions remained difficult, M&A activity amongst Irish corporates continued in 2009 and reflected a mix of companies in pursuit of international expansion, disposing of non-core or under-performing operations and general distress M&A. We expect to see further consolidation in 2010 in the face of ongoing challenging economic conditions with a cohort of ambitious Irish companies continuing to implement successful growth strategies."

About mergermarket

mergermarket covers corporate finance activity in Europe, North America, Latin America and the Asia-Pacific region. mergermarket generates proprietary intelligence and delivers it, together with daily aggregated content, on its www.mergermarket.com platform.

About IBI Corporate Finance

IBI Corporate Finance is Irelands leading corporate finance adviser, providing expert, independent advice. It acts for public, private and semi-state companies covering a wide spectrum of domestic and international transactions.

IBI Corporate Finance is a wholly-owned subsidiary of the Bank of Ireland Group and is the exclusive Irish member of M&A International Inc.