Metals deals insights: Midyear 2020

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The global Metals industry was expected to face challenges in 2020 from continued softer demand, lower manufacturing levels, and ongoing changes resulting from trade negotiations and related tariffs, and in the first half of 2020, it was dealt an unexpected blow from the COVID-19 pandemic.

Industry suppliers continue to be faced with weakened demand from major downstream consumers in industrial manufacturing, aerospace, automotive, construction and others. This significant contraction in demand, along with a myriad of other challenges caused by the pandemic, resulted in decreased deal value, volume, and average deal size when compared to the first half of 2019. This impact is also evidenced by the decrease in deal volume from Q1 to Q2 2020, as many businesses, especially domestic, experienced their biggest disruptions from the pandemic to date.

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“While uncertainties around the ongoing pandemic and recession weigh heavily on investors, companies with strong balance sheets and access to capital could drive a gradual pick-up in M&A activity in the months ahead, and we expect M&A to recover before the overall US economy.”

- Brian Kelly, US Metals Deals Leader

High level trends and highlights

  • The Metals sector has experienced a decline in deals volume and value in the first half of 2020.
  • Total deal value in H1 2020 amounted to $5.9 billion, a decrease of 81% compared to H1 2019. A similar trend was noted for deal volume in H1 2020, registering 271 deals compared to 309 deals in H1 2019, a 12% decline.
  • Deal value in Q1 2020 and deal volume in Q2 2020 were the lowest in the last eight quarters. The drop in deal volume in the second quarter is likely attributed to the lower demand coupled with the emergence of the COVID-19 pandemic.
  • The top ten deals totaled $3.7 billion, accounting for approximately 63% of the total deal value in H1 2020.

  • The Metals sector experienced a decline in transaction value and volume across all sub-sectors. However, the number of transactions in aluminum was the least affected among all others sub-sectors in H1 2020 when compared to H1 2019.
  • The Other metals sub-sector exhibited the highest deal value and volume in H1 2020, accounting for 42% of the total deal value. Five of the top ten deals in H1 2020 belong to this sub-sector.
  • Steel also made a significant contribution to the sector’s activity, accounting for 32% of the total deal value and 42% of the total deal volume. The sub-sector also contributed two of the top ten deals in H1 2020.

  • Within-border deals provided the majority of H1 2020 deal value and volume. They contributed 76% of deal volume and 71% of deal value in H1 2020. Within-border transactions accounted for seven of the top ten deals in H1 2020.
  • Cross-border deals made up 24% of deal volume and 29% of deal value in H1 2020 and included the largest deal – Templar Investments Ltd. acquisition of Jindal Shadeed Iron & Steel LLC for $1 billion (deal status – pending). 

  • Asia and Oceania dominated H1 2020 disclosed deal value and volume. The players in the region were the most active acquirers, with $4.9 billion or 83% share in terms of deal value, driven by China, with six deals among the overall top ten deals. It is the only region to see positive growth in disclosed transactions compared to H1 2019.
  • North America exhibited the second highest deal value of around $0.5 billion. The number of disclosed transactions in the region decreased by 25% in H1 2020 compared to H1 2019.
  • Africa and South America regions were notably low in in H1 2020, both in terms of disclosed deal value and volume. 



Metals sub-sector analysis

Other Metals contributed the most to the sector in terms of deal value and volume in H1 2020, driven by five of the top ten deals in H1 2020. It was also the only sub-sector that maintained total deal volumes from H1 2019, although deal value in the sub-sector dropped significantly: H1 2019 saw two megadeals of $10 billion and $7 billion, respectively, while in H1 2020 the maximum deal value reached only $0.5 billion.

Steel was the second highest contributor of deal volume and value in H1 2020. The sub-sector accounted for 32% of the total deal value in H1 2020, driven by two deals within the top ten. The sub-sector also experienced a decline in both deal volume and value compared to H1 2019.

Aluminum contributed 9% of total deal volume in H1 2020. The decline in deal volume was the least in the sub-sector among all sub-sectors. The sector has two deals listed among the top ten deals in H1 2020.

Iron ore accounted for 6% of the total volume in H1 2020 and contributed only 8% share of transaction value. The transaction volume in the sub-sector declined by 48% in H1 2020 compared to H1 2019.


Financial vs. strategic investors

Strategic investors contributed 56% and 51% share of total deal value and volume, respectively, in H1 2020. In Q2 2020, financial buyers remained active in the sector and contributed more deal value share than strategic investors for the first time since Q3 2019. It was the second time in the last 12 quarters that financial investors contributed more deal value than strategic investors.


Metals deals outlook

Although talk of a slowdown in economic growth and an eventual recession became more prevalent at the end of 2019, the way it manifested in 2020 was unexpected. The COVID-19 pandemic up-ended business and life as usual, and the M&A landscape was no exception. News of several deals put on hold or canceled during the first half of 2020 permeated the deals community. Prospective corporate and private equity buyers alike have been forced to reevaluate planned and in-process deals due to the pandemic, with many adopting a “wait and see” approach. This slowdown is evidenced in the Metals deals metrics from the first half of 2019 vs 2020, as deal value has declined by 81% and deal volume declined by 12%.

While producers across the metals spectrum have all felt the squeeze, the steel industry has been acutely impacted.  Producers of steel products have had to contend with decreasing demand, as consumption from major downstream industries such as manufacturing, auto, and construction were slowed by the pandemic and the measures to address it. Domestically, steel production has decreased due in part to reduced production from major automakers as they idled plants to prevent the spread of infection.

Faced with the immediate challenge of the pandemic, businesses focused on protecting worker safety, solving operational challenges, and bolstering liquidity, often leaving M&A strategies and activity on the backburner. However, as we move to the second half of 2020 and beyond, corporations and private equity firms may refocus their M&A efforts in an attempt to seek value through acquisitions or streamline core operations through divestitures. As experienced in previous downturns, proactive and timely M&A may help entities leapfrog competition, take share and accelerate recovery, as acquiring early in a downturn can lead to returns in excess of peer groups. Similarly, active and timely portfolio management and divestitures can help free up cash and capital to both reinforce business and allow future investment.

While uncertainties around the ongoing pandemic and recession weigh heavily on investors, companies with strong balance sheets and access to capital could drive a gradual pick-up in M&A activity in the months ahead, and we expect M&A to recover before the overall US economy.

About the data

The information presented in this report is an analysis of deals in the global metals industry. Deal information was sourced from Refinitiv and includes deals for which targets have an SIC code that falls into one of 30 metals industry groups. Certain adjustments have been made to the information to exclude transactions which are not specific to metals or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between July 1, 2017 and June 30, 2020, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

Contact us

Brian Kelly

Metals Deals Leader, PwC US

Michael Tomera

US TAS Market Leader, Midwest Market, PwC US

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