Global Metals Deal Activity Rebounds in the Second Quarter of 2014
08/12/2014 - Merger and acquisition (M&A) activity in the global metals sector surged in the second quarter of 2014, showing robust growth from both a sequential and year-over-year basis as companies looked to acquire assets across key industries to strengthen their growth opportunities and drive higher-margin sales, according to PwC US.
During the second quarter of 2014, there were 22 transactions valued at US$50 million or more, totaling US$9 billion, nearly triple in deal value from the first quarter of 2014, which had 13 deals accounting for US$3.4 billion. On a year-over-year basis, deal volume and value also increased from 18 deals worth US$6.9 billion during the second quarter of 2013. There were two mega deals (transactions worth more than US$1 billion) during the three-month period, valued at US$3 billion and US$2.2 billion, respectively. This raised the quarter’s average deal value to US$410 million from US$259 million in the first quarter and US$383 million during the same period last year.
Deals by strategic investors continued to drive M&A activity in the second quarter of 2014, accounting for 15 transactions worth US$50 million or more, while financial investors were involved in seven deals. This compares to the nine transactions involving strategic investors during the first quarter of 2014 and 13 deals in the second quarter of 2013.
“The second quarter showed marked improvement in deal activity as metals companies looked to strengthen their businesses through strategic integrations with other industries in an effort to bolster sales and supplement their core metals operations,” said Sean Hoover, U.S. metals leader at PwC. “Strong balance sheets have benefited metals businesses and provided them with a range of deal opportunities to manage around overcapacity and pricing issues that have challenged the industry, especially in the steel and aluminum sectors.”
Deals within the steel and aluminum categories rebounded from the previous quarter, with the steel segment accounting for US$4.2 billion, or nearly 47% of the total deal value during the period, and the aluminum sector recording US$3.1 billion, or 34% of the quarter’s total deal value. The “other” category, which includes copper, nickel and other non-precious metals, accounted for US$1.7 billion, or nearly 19% of the total deal value. The growth in deal activity within the aluminum segment was largely driven by one of the mega deals announced during the quarter.
On a regional basis, North America led deal value during the second quarter of 2014, accounting for nearly US$4.2 billion of the quarter’s total deal value. This activity was driven by U.S.-based companies, which were responsible for five acquisitions valued at approximately US$ 4.1 billion, including the US$3-billion mega deal. “Despite weak residential construction activity in the early part of the second quarter, non-residential construction in the U.S. increased, driving the demand for steel,” continued Hoover.
Asia and Oceania continued to be a dominant player in deal activity, driving nearly two-thirds of the quarter’s deal volume during the three-month period. China continued to be the dominant player in the region, recording 12 local deals valued at almost US$3.9 billion, which represents over 95% of the region’s deal value of approximately US$4.1 billion. While these deals are indicative of China’s continuing goal to consolidate its heavy industry and improve productivity, the possibility of the country opening up its steel industry to foreign investment will also likely drive further deal activity in the region, according to PwC.
“As the U.S. economy rebounds, confidence increases in the Eurozone and growth in Asia sustains, we anticipate industrial demand to increase, supporting merger activity as companies look to build economies of scale,” continued Hoover.
PwC’s metals M&A analysis is a quarterly report of announced U.S. transactions with value greater than US$50 million, analyzed by PwC using transaction data from Thomson Reuters.
PwC's Global Metals practice is composed of a worldwide network of industry professionals serving metals clients and strategically located in more than 30 countries. PwC services global clients involved in ferrous and nonferrous primary and secondary metals production by bringing experience, leading international industry practices, and a wealth of specialized resources to help solve business issues.
Deals by strategic investors continued to drive M&A activity in the second quarter of 2014, accounting for 15 transactions worth US$50 million or more, while financial investors were involved in seven deals. This compares to the nine transactions involving strategic investors during the first quarter of 2014 and 13 deals in the second quarter of 2013.
“The second quarter showed marked improvement in deal activity as metals companies looked to strengthen their businesses through strategic integrations with other industries in an effort to bolster sales and supplement their core metals operations,” said Sean Hoover, U.S. metals leader at PwC. “Strong balance sheets have benefited metals businesses and provided them with a range of deal opportunities to manage around overcapacity and pricing issues that have challenged the industry, especially in the steel and aluminum sectors.”
Deals within the steel and aluminum categories rebounded from the previous quarter, with the steel segment accounting for US$4.2 billion, or nearly 47% of the total deal value during the period, and the aluminum sector recording US$3.1 billion, or 34% of the quarter’s total deal value. The “other” category, which includes copper, nickel and other non-precious metals, accounted for US$1.7 billion, or nearly 19% of the total deal value. The growth in deal activity within the aluminum segment was largely driven by one of the mega deals announced during the quarter.
On a regional basis, North America led deal value during the second quarter of 2014, accounting for nearly US$4.2 billion of the quarter’s total deal value. This activity was driven by U.S.-based companies, which were responsible for five acquisitions valued at approximately US$ 4.1 billion, including the US$3-billion mega deal. “Despite weak residential construction activity in the early part of the second quarter, non-residential construction in the U.S. increased, driving the demand for steel,” continued Hoover.
Asia and Oceania continued to be a dominant player in deal activity, driving nearly two-thirds of the quarter’s deal volume during the three-month period. China continued to be the dominant player in the region, recording 12 local deals valued at almost US$3.9 billion, which represents over 95% of the region’s deal value of approximately US$4.1 billion. While these deals are indicative of China’s continuing goal to consolidate its heavy industry and improve productivity, the possibility of the country opening up its steel industry to foreign investment will also likely drive further deal activity in the region, according to PwC.
“As the U.S. economy rebounds, confidence increases in the Eurozone and growth in Asia sustains, we anticipate industrial demand to increase, supporting merger activity as companies look to build economies of scale,” continued Hoover.
PwC’s metals M&A analysis is a quarterly report of announced U.S. transactions with value greater than US$50 million, analyzed by PwC using transaction data from Thomson Reuters.
PwC's Global Metals practice is composed of a worldwide network of industry professionals serving metals clients and strategically located in more than 30 countries. PwC services global clients involved in ferrous and nonferrous primary and secondary metals production by bringing experience, leading international industry practices, and a wealth of specialized resources to help solve business issues.
