Global Metals Industry Mergers & Acquisitions Reach $77 Billion in North America

April 17, 2008
Majority of deals were in steel industry

Deals in the global metals industry in North America soared to record levels in 2007, according to PricewaterhouseCoopers, indicating that the credit crisis in the U.S. has not hindered industry growth, according to a report released by PricewaterhouseCoopers. The report reveals that 115 deals, totaling $77 billion in value, took place last year in North America. This accounts for 53% of total deal value in the global metals industry during 2007 and nearly matches the entire global metals industry deal value for 2006 ($86 billion).

The majority of deals took place in the steel industry, with North American companies serving as targets for three of the top six deals in the steel sector. This contrasts deal-making in the rest of the world, which saw dynamic shifts of focus in 2007 -- from steel to aluminum and away from Western Europe to North America.

"Industry consolidation and the declining value of the dollar will continue to make the U.S. an attractive region for steelmakers from emerging and industrialized markets alike," said Douglas Dean, U.S. metals leader, PricewaterhouseCoopers. "It does not appear that steel consumption will not taper off anytime soon, and, in North America specifically, consumption is likely to outpace production over the next couple of years."

Several steelmakers based in emerging economies acquired North American producers during 2007, both as a way of moving up the value chain and also to obtain greater access to the U.S. market, according to the report. In return, some North American producers bought smaller competitors as a means for reducing overcapacity and expanding their product offerings.

North America's aluminum market was particularly valuable in 2007, with 18 deals totaling $46.7 billion. In contrast, the steel sector accounted for a great number of deals (71) but accumulated less total deal value than the aluminum sector, at $30 billion. In addition, 26 deals closed in the base metals industry, accounting for $300 million in North American deals last year.

While deal-making in the global metals industry soared to unprecedented levels during 2007, the sector was not completely unaffected by the credit crisis. Historically, financial buyers account for a significant portion of the total deal value of transactions (20% in 2006); however, they only accounted for four percent in 2007. "With increased uncertainty in the financial environment, financial buyers are acting more cautiously than ever before proposing deals in the metals industry," said Jim Forbes, global metals leader, PricewaterhouseCoopers. "With continued strong metal prices and demand, corporate buyers will help drive and support the booming global M&A metals market over the next few years."

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