French heavy contractor Technip said on May 21 it would spend $300 million in cash to buy most of Baton Rouge, La.-based Shaw Group Inc.'s energy and chemicals unit, but the proposed purchase comes as two studies show industry merger-and-acquisition rates dropping in the first quarter of 2012.

Shaw says the divestiture would allow it to focus in core power areas, while Technip could gain a foothold in the booming North American oil-shale and petrochemicals markets.

"We believe Shaw received a fair price, although investors more recently may have gotten overly enthusiastic given recent excitement over petro-chem spend and hoped for a higher price in the $400-million to $500-million range," says Jamie Cooke, managing director and E&C lead analyst at Credit Suisse. She speculates that Shaw is planning its own acquisitions "to better position its portfolio for growth."

However, in two separate studies, M&A watchdogs Morrissey Goodale and PricewaterhouseCoopers (PwC) show less deal-making in the prior four months.

Consultant Morrissey Goodale shows M&A activity down 11% compared to the same quarter in 2011. Firm President Mick Morrissey points to a conflict on the state of the economy between still "ultra-cautious" buyers and more optimistic sellers.

He says publicly traded buyers accounted for only 9.5% of deals in the quarter compared to 15% in the same period last year. International deal activity fell 25% year over year, says Morrissey.

The PwC study says the number of industry deals was the lowest in 12 quarters, with deal values down more than 14%. "Uncertainty in the global economy and speed of recovery in the E&C industry are overshadowing companies' hunger for growth," says Kent Goetjen, the firm's E&C sector leader.

Both reports see the slowdown trend continuing, but not all agree.

"We find that quarter-to-quarter trends are not overly meaningful since they represent too short a period of time," says Andrej Avelini, managing director of industry M&A consultant EFCG Inc. "We may come short of expectations in 2012, but it will be likely at least as high as 2011."

Adds Colvin Matheson, managing director of industry management consultant Matheson Financial Advisors, "most firms have finally rung out their excesses and are turning profit again, albeit low. So valuations are pretty attractive. Firms put ownership transition on hold for 4+ years and they cannot do that forever."