The global Metals industry faced significant challenges in 2019 and as a result deal activity suffered throughout the year. Not only has the industry had to contend with dynamic trade negotiations and tariffs directly impacting products, but also a weakening in US manufacturing activity in the second half of the year. The Steel sub-sector in particular has slowed, as producers faced falling demand and lower prices during the year. These and other factors were among the reasons for reduced deal value, volume, and average deal size in 2019 compared to 2018.
“While 2019 was a stellar year for the US economy and M&A, it was also permeated with uncertainty. From shifting trade policies to geopolitical instability and volatile metals pricing, deal makers focused on metals did not have an easy go of it. Recent progress has been seen, but the picture remains murky, and longer-term consequences are unclear, meaning Metals deal activity may remain subdued into 2020.”
While Q4 2019 experienced increased deal flow from prior quarters, the year as a whole fell short when compared to 2018. Twenty nineteen not only saw a 10% decline in total deal volume from the prior year, deal value contracted by 33% from 2018 figures. The continued uncertainty investors faced throughout the year can be evidenced in these metrics.
The Steel industry in particular was adversely impacted during the year. Despite having the largest deal in Q4 2019 with Cleveland Cliffs $1.1 billion acquisition of AK Steel, the Steel sub-sector experienced a 64% reduction in deal value from 2018. The industry has suffered from a softening in demand as a result of adversity faced in the automotive industry and an overall drop in manufacturing. With US Steel’s recent layoff announcement and reports of manufacturing activity falling to the lowest levels in a decade, the industry appears to be facing strong headwinds as it enters the new decade.
Ongoing trade negotiations and the escalation of retaliatory tariffs were the hallmark of 2019, with the uncertainty surrounding these policies potentially hindering deal activity throughout the year. While still not completely resolved, progress appears to have been made with the recent announcement of a Phase One trade deal between the United States and China. Additionally, the United States-Mexico-Canada Agreement (USMCA) was passed by the US House of Representatives and came one step closer to completion. Both these developments may bolster deal activity in the months to come.
The information presented in this report is an analysis of deals in the global metals industry. Deal information was sourced from Thomson Reuters 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 January 1, 2017 and December 31, 2019, 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.
Metals Deals Leader, PwC US
US TAS Market Leader, Midwest Market, PwC US