PwC last week released a report on Q3 merger and acquisition (M&A) activity, showing an uptick in momentum despite the trade headwinds that continue to swirl around the world (namely, between the U.S. and China).
The total value of M&A deals in Q3 jumped 78% compared with Q2, according to the report.
“Despite headwinds caused by global trade tension and increasing interest rates, cash-rich corporations with strategic rationales are likely to drive deal activity for the rest of 2018 and into 2019,” said Brian Kelly, PwC’s U.S. metals deals leader.
Among the aforementioned trade-related headwinds includes, of course, the U.S. tariffs on steel and aluminum.
“While the ongoing tariff disputes led to margin pressure for smaller producers of steel and aluminum and downstream manufacturers, it is expected to open up opportunities for strategic investors who are looking to consolidate and stay competitive,” the report states. “The US maintained its stance on increased metal tariffs despite proposing USMCA (a revamped version of NAFTA) and allowing US companies to petition for exemptions from tariffs where highly specialized metal imports (which cannot be produced domestically) are required in products.
“This is likely to shape North American deal activity in Q4 2018 and 2019.”
The quarter featured one megadeal (i.e., a deal with a disclosed value of $5 billion or more), that being the $6.1 billion purchase of Randgold Resources Ltd. by Barrick Gold Corp.
Total deal volume fell 9% compared to Q2 2018 and by 27% compared with Q3 2017, but deal value jumped 78% compared with Q2 2018 and by 179% compared with Q3 2017.
Broken down by metals sector, the value of steel and aluminum deals in Q3 fell by 22% and 81%, respectively, compared with Q2. Total deal value hit $16.1 billion for the quarter, with an average deal size of $223.2 million.
Read the full PwC report on metals sector M&A activity in Q3 here.