Global metals deals insights: Q2 2017

Executive summary

M&A activity in the global metals sector brought in 15 deals for a total value of $3.9 billion in Q2 2017. Recovering commodity prices and lower production costs were expected to drive M&A growth this year; however, industry players are focused on improving shareholder returns by optimizing existing assets and completing strategic acquisitions that require low capital investment. 

Local deals in the Asia & Oceania region continue to drive deal volume, demonstrating the region’s growing interest in infrastructure. Nevertheless, transaction value has steadily declined in the region during the past year as metal prices have responded to decelerated output from China's manufacturing sector and the future demand for infrastructure and construction remains uncertain. Metal prices have also been affected by China’s limited credit growth, which has created a rise in borrowing costs. As a result, companies are restraining their capital expenditure and cautiously investing on smaller projects and assets.

Moreover, industry players are evading costly projects that could become unprofitable if metals were to enter a bear market. We expect M&A activity to improve once commodities reach higher prices.

Key trends/highlights

  • Global metals M&A activity in Q2 2017 brought in 15 deals with a disclosed value greater than $50 million, for a total deal value of $3.9 billion.
  • As companies focus on obtaining value from existing assets and projects, M&A activity has concentrated on smaller transactions, with average deal size decreasing to $259 million this quarter.
  • AM Investco’s acquisition of Ilva S.p.A, Europe’s largest single steel site, for $2 billion was the largest transaction and only megadeal announced this quarter.
  • The steel category continues to drive M&A value in the Metals sector, accounting for 60% of transaction value, while the other metals category leads M&A activity with 7 transactions.
  • The Asia & Oceania region continues to drive M&A activity, accounting for 93% of volume by target region.
  • Deal value for Asia & Oceania by acquirer and target region has declined over the past year as prices remain low, while borrowing costs are on the rise due to China’s restricted credit growth.

"Q2 2017 saw a continued reduction in terms of deal volume and value in the metals industry compared with Q1 2017 and Q4 2016. This trend can be expected to sustain in the near term as commodity price recoveries have alleviated balance sheet pressure to sell assets, and companies are more likely looking to achieve full value from divestitures."

Brian Kelly, US Metals Deals Leader

Contact us

Brian Kelly
US Metals Deals Leader
Tel: +1 (216) 875 3121

Michael Tomera
US TAS Market Leader
Tel: +1 (412) 355 6095

Jock O´Callaghan
Global Metals Leader
Tel: +61 (3) 8603 6137

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