Global Metals M&A Value Doubles in the First Quarter
With stronger corporate balance sheets, improved availability of credit, and metal prices stabilizing, the recovery in global metals merger and acquisition activity is expected to continue for the balance of 2011, according to Forging ahead, a quarterly analysis of M&A activity by PricewaterhouseCoopers, New York.
In the first quarter of 2011, PwC reports 26 deals with value greater than $50 million, accounting for $12.9 billion in total deal value, a 105 percent increase from $6.3 billion in the first quarter of 2010, which had two fewer deals. First quarter 2011 average deal size was $500 million, a 67 percent jump from the $300 million in the first quarter of 2010. Four mega deals, transactions with disclosed value of at least $1 billion, were announced in the first quarter of 2011, and more are expected in future quarters. Half of the mega deals in the first quarter involved North American-based targets or acquirers, according to PwC's report.
The metals M&A deal market remained active in the first quarter, compared to the previous quarter, with the same number of deals announced; however, there was an 8 percent dip in deal value for deals over $50 million.
Deal valuation overall, as reflected by EBITDA, increased significantly in the first quarter. This improvement, according to PwC, was likely driven by companies with cash-heavy balance sheets seeking attractive investments that could bolster organic growth.
"The metals industry continues to enjoy a promising period of M&A activity after two consecutive years of total deal value that exceeded $90 billion," says Bob McCutcheon, U.S. metals leader at PwC. "Additionally, the trend in financial liquidity indicates that the sector is becoming better positioned to pay for new deals. This cash, in combination with improved availability of credit and interest rates that are extremely low, positions companies favorably to take advantage of opportunities. We expect that these trends could lead to increased activity, at least in the near term."
Targets classified as iron ore were the primary driver of activity during the first quarter, contributing almost 40 percent of the quarter's deals worth a total of $5.1 billion. This is a significant increase over full-year 2010 when iron ore only represented 20 percent of total deals. Steel targets represented a total deal value of $4.4 billion, while aluminum deals were worth $2.3 billion.
For a copy of Forging ahead, PwC's quarterly analysis of M&A activity in the global metals sector, visit www.pwc.com/us/industrialproducts.