PwC: Metals deal size, volume fall in 2019, but Q4 showed signs of renewed growth

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M&A activity in global metal firms dropped 10% by volume compared to 2018, but the value of all deals declined by a third driven by fewer “megadeals” — transactions with disclosed values greater than $5 billion — compared to the previous year, according to PwC’s Global Metal Deal Insights report for 2019.

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The PwC report cited weakness in the automotive sector and U.S manufacturing overall for playing a part in layoffs at U.S. Steel and a 64% falloff in 2019 deal activity in the steel sub-sector compared to the previous year, even when including the $1.1 billion acquisition of AK Steel by Cleveland Cliffs in Q4.

The two largest deals of the year had values great enough to reach the megadeal category.

The first was the acquisition of Goldcorp Inc. by Newmont Mining Corp. for $10 billion. In addition, Newmont Mining Corp. and Barrick Gold Corp. combined their Nevada-based mining operations into Nevada Gold Mines at a value of $7.2 billion. In the PwC analysis, both of these deals are recorded in Q1 2019.

In third behind the two megadeals was Shimge Pump Industry Group Co. Ltd’s $2.5 billion acquisition of Tianshan Aluminum Co Ltd of the 8th Division of Xinjiang Production & Construction Corps, according to the PwC report.

M&A sparks in Q4

While 2019 lagged the previous year overall, the fourth quarter saw some signs of growing strength in metals M&A activity.

According to PwC, both average deal size and total deal volume were more than double Q3 2019 figures, on just a 7% increase in total number of deals.

The average Q4 deal size of $78.7 million was still significantly lower than the average deal size for the full year of $121 million, the result of a high $312 million average deal size in Q1 2019 when an above-average number of megadeals were recorded.

PwC analysts noted the signing of the United States-Mexico-Canada Agreement (USMCA) and the “Phase One” agreement in the ongoing U.S.-China trade negotiations could offer relief and stability for metal businesses and manufacturers in the new decade. Following the U.S. Congress and Mexican Senate’s approvals, Canada is the last party yet to approve the USMCA (all three countries’ legislatures must approve the deal before it can go into force, replacing the 1994 North American Free Trade Agreement).

Globally, North America led the world in intraregional deal value, with 69 deals worth over $19 billion dollars in 2019. North America also saw the greatest inbound M&A activity, with 55 deals completed worth $3.5 billion.

Europe saw the greatest value of outbound global M&A activity, spending over $2.4 billion in 2019. By far the most active region for intraregional deals was Asia and Oceania, where 307 deals worth a total of $13 billion were completed in 2019.

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This trend showed no signs of slowing at the end of 2019, as PwC indicated Asia and Oceania led the world in both volume and deal value — as both the target region and acquirer — in the fourth quarter.

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