GlobalData’s latest report, ‘Quarterly Equipment and Services M&A Deals Review – Q1 2020’, shows that a combined value of US$7 billion in mergers and acquisitions (M&A) were announced in the equipment and services sector in Q1 2020. This was a 17% decrease from the US$8.4 billion in M&A deals announced in the previous quarter. A year-on-year comparison witnessed a decrease of 12% in the number of deals and 25% in value, compared with Q1 2019, when there were 116 deals worth a combined value of US$5.6 billion.
McDermott’s agreement to sell Lummus Technology to Illuminate Buyer for approximately US$2.7 billion was the top deal registered in Q1 2020. Lummus Technology is a licensor of proprietary gas processing, refining, petrochemical, and coal gasification technologies as well as a supplier of proprietary catalysts, equipment and related engineering services. In addition, McDermott will have the option to retain or purchase, as applicable, a 10% common equity ownership interest in the entity purchasing Lummus Technology. Evercore Group L.L.C is acting as financial advisor and Kirkland & Ellis LLP is acting as legal advisor to McDermott in the transaction. Lazard Ltd is acting as financial advisor to Chatterjee Group and Rhone Group in the transaction.
McDermott intends to use the proceeds from the sale to repay the DIP financing, as well as fund emergence costs, provide cash to the balance sheet for long-term liquidity and to strengthen its balance sheet.
Equipment and Services M&A Deal Value and Count, Q1 2020
On the volume front, the number of M&A decreased marginally by 5% from 107 deals in Q4 2019 to 102 in Q1 2020, of which 44 were cross border transactions and the remaining 58 were domestic transactions. North America was the destination of choice for cross-border M&A activity in Q1 2020, recording 16 cross-border transactions in the quarter.
Regionally, North America led the global acquisitions market in terms of the number of deals and deal value in Q1 2020, with 52% and 83% shares respectively, registering 57 deals of a combined value of US$5.9 billion. Europe accounted for 21 percent share in Q1 2020, comprising 21 acquisitions, of which 10 were cross-border and the remaining 11 were domestic acquisitions, while Asia accounted for 12 global deals, or 12% in Q1 2020, of which six were domestic acquisitions and the remaining six were cross-border transactions. Oceania and Middle East registered eight and three deals respectively in Q1 2020; and Africa accounted for 6% of global deals, or six deals in the quarter.