Merger & acquisition (M&A) deals in the global metals industry in North America soared to record levels in 2007, according to PricewaterhouseCoopers (PWC), indicating that the credit crisis in the U.S. has not hindered industry growth.  In 2007, the value of North American metals deals totaled $77 billion, which came close to matching the value of metals deals worldwide in 2006. The value of those deals globally in 2006 reached $86 billion.

The PWC report, titled “Forging Ahead: Mergers and Acquisitions Activity in the Global Metals Industry,” estimates that 115 deals totaling $77 billion in value took place in 2007 within the metals industry in North America.  This region alone accounted for 53 percent of the total deal value announced in the global metals industry last year.

The report’s authors say they are seeing a shift in focus away from Western Europe and the creation of a new hotbed for M&A activity in North America.

The majority of North American deals took place in the steel sector, where consumption is steady, despite the current credit crisis. In those steel transactions, North American companies served as targets for three of the top six deals in the steel sector.  This contrasts with deal-making in the rest of the world, which saw dynamic shifts of focus in 2007. Those shifts include a switch 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 for PWC.  “It does not appear that steel consumption will 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.  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 percent in 2006); however, they only accounted for four percent in 2007.  According to the report, the fallout from the credit crunch has been particularly evident in the steel sector, where financial buyers only accounted for $3.9 billion of deal value in 2007 compared to $14.2 billion in 2006.

“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, PWC.  “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.”

About the Report

“Forging Ahead: Mergers and Acquisitions Activity in the Global Metals Industry,” references several specific deals and companies that were active in transactions within the global metals industry over the past two years. The report also includes the perspectives of 26 CEOs from the metals industry on their optimism in the industry, as reported by PricewaterhouseCoopers 11th Annual Global CEO Survey.  For more information and to access the full report, visit: www.pwc.com/metals.