Posted on 04 Aug 2020
Metals sector merger and acquisition (M&A) activity recorded a two-year low in the first half of 2020 as weaker manufacturing and trade dispute uncertainty were compounded by the Covid-19 pandemic, says PricewaterhouseCoopers.
However, M&A activity in the US is expected to recover before the overall US economy.
“While uncertainties around the ongoing pandemic and recession weigh heavily on investors, companies with strong balance sheets and access to capital could drive a gradual pick-up in M&A activity in the months ahead,” PwC says in a note seen by Kallanish.
Corporations and private equity firms may refocus their M&A efforts in H2. As experienced in previous downturns, proactive and timely M&A may help entities leapfrog competition, take share and accelerate recovery, the consultancy adds.
Total metals sector deal value in H1 amounted to $5.9 billion, down -81% compared to H1 2019. Some 271 deals were registered in H1, down -12%. Deal value in the first quarter and deal volume in Q2 were the lowest in the last eight quarters. The drop in deal volume in Q2 is likely attributed to lower demand coupled with the emergence of the pandemic.
Steel was the second highest contributor of deal volume and value, accounting for 32% of the total deal value and 42% of the total deal volume. The sub-sector also contributed two of the top ten deals in H1.
Cross-border deals made up 24% of deal volume and 29% of deal value in H1 and included the largest deal – Templar Investments Ltd. acquisition of Jindal Shadeed for $1 billion. The deal is yet to be finalised.
“Producers of steel products have had to contend with decreasing demand, as consumption from major downstream industries such as manufacturing, auto, and construction were slowed by the pandemic and the measures to address it,” PwC observes. “Domestically [in the US], steel production has decreased due in part to reduced production from major automakers as they idled plants to prevent the spread of infection.”
Source:Kallanish
