PwC US: Metals Industry Saw Uptick in M&A Activity in Q4 2014
02/27/2015 - The metals sector recorded a significant increase in merger and acquisition (M&A) activity during the fourth quarter of 2014, but the year overall saw a decline in deal value compared to 2013, according to Forging Ahead, a quarterly analysis of the global deal activity in the metals industry by PwC US.
In the fourth quarter of 2014, there were 28 deals worth more than US$50 million, for a total value of US$9 billion, an improvement in deal volume by 40% (21 deals) and in value by almost 18% (US$8.5 billion) from the prior quarter. For all of 2014, the metals sector recorded 88 deals and a total value of US$30 billion, a slight increase in volume (84) from 2013, but a decline of 26%, or US$40 billion, in 2013. There was only one megadeal, or transactions worth more than US$1 billion, in the fourth quarter, rounding out to a total of seven megadeals for 2014.
“The decline in megadeals for this year may have resulted in a low deal value compared to last year, but it’s nice to see a rebound and an uptick in fourth quarter deal activity,” said Michael Tomera, U.S. metals leader at PwC. “We have also seen an increase in financial investors participating in deals in 2014, and expect that momentum to continue into 2015. Combined with this trend, and as the U.S. economy continues to strengthen and the uncertainty levels in Europe decline, we remain cautiously optimistic toward M&A activity in 2015.”
Half of the deals in the fourth quarter were done by financial investors, and in 2014, 35% of them were involved, compared to 28% in 2013 – an increase of 25%. “Although strategic investors still dominate deal activity in the metals industry, we’re seeing that financial investors are looking for investments to lock in some gains. They are now better suited to do these deals as there is cash on the sidelines, and if this activity continues, we may see an improvement in deal activity overall,” said Tomera.
Asia & Oceania continued to lead deal volume and value with 62 deals worth more than US$50 million valued at more than US$17 billion in 2014. Four of these transactions were megadeals with a total value of US$6 billion. As China continues to consolidate its metals industry, the country was the key driver of M&A activity with 40 deals valued at almost US$12 billion for the year. North America recorded the second-largest deal volume and value in 2014 with 25 deals worth a total of US$13 billion. “China is experiencing an increase in middle class and a movement of urbanization as more people are relocating to the cities, driving the need for infrastructure build-out where many of the raw materials are needed to support construction work,” added Tomera.
The steel segment continued to lead in deal activity, accounting for 40% of the year’s deal value at US$12 billion, followed by the “other” category at 10%, which includes copper, nickel and other non-precious metals. “We’re seeing a larger focus on downstream applications of metals, where aluminum manufacturers are focused on leveraging advanced technology to improve efficiencies. This in turn could also lead to more deal activity in the space for 2015,” concluded Tomera.
For information on Forging Ahead and to access the full Q4 2014 report, visit: http://www.pwc.com/us/industrialproducts
PwC’s metals M&A analysis is a quarterly report of announced global transactions with value greater than US$50 million, analyzed by PwC using transaction data from Thomson Reuters.
“The decline in megadeals for this year may have resulted in a low deal value compared to last year, but it’s nice to see a rebound and an uptick in fourth quarter deal activity,” said Michael Tomera, U.S. metals leader at PwC. “We have also seen an increase in financial investors participating in deals in 2014, and expect that momentum to continue into 2015. Combined with this trend, and as the U.S. economy continues to strengthen and the uncertainty levels in Europe decline, we remain cautiously optimistic toward M&A activity in 2015.”
Half of the deals in the fourth quarter were done by financial investors, and in 2014, 35% of them were involved, compared to 28% in 2013 – an increase of 25%. “Although strategic investors still dominate deal activity in the metals industry, we’re seeing that financial investors are looking for investments to lock in some gains. They are now better suited to do these deals as there is cash on the sidelines, and if this activity continues, we may see an improvement in deal activity overall,” said Tomera.
Asia & Oceania continued to lead deal volume and value with 62 deals worth more than US$50 million valued at more than US$17 billion in 2014. Four of these transactions were megadeals with a total value of US$6 billion. As China continues to consolidate its metals industry, the country was the key driver of M&A activity with 40 deals valued at almost US$12 billion for the year. North America recorded the second-largest deal volume and value in 2014 with 25 deals worth a total of US$13 billion. “China is experiencing an increase in middle class and a movement of urbanization as more people are relocating to the cities, driving the need for infrastructure build-out where many of the raw materials are needed to support construction work,” added Tomera.
The steel segment continued to lead in deal activity, accounting for 40% of the year’s deal value at US$12 billion, followed by the “other” category at 10%, which includes copper, nickel and other non-precious metals. “We’re seeing a larger focus on downstream applications of metals, where aluminum manufacturers are focused on leveraging advanced technology to improve efficiencies. This in turn could also lead to more deal activity in the space for 2015,” concluded Tomera.
For information on Forging Ahead and to access the full Q4 2014 report, visit: http://www.pwc.com/us/industrialproducts
PwC’s metals M&A analysis is a quarterly report of announced global transactions with value greater than US$50 million, analyzed by PwC using transaction data from Thomson Reuters.
