In 2004, the value of disclosed deals recorded by metals industry companies reached $37 billion. The steel sector led the way with 85 percent of total deal value. The level of activity bolsters our view that consolidation in the ferrous sector has only just begun.
Despite the recent improvement in the steel industry’s performance, the sector continues to be valued at a price-to-earnings discount relative to its industrial peers. This reflects investors’ continuing expectation of market volatility. That expectation is well justified: consolidation is urgently required to achieve the desired aims of greater bargaining power, production discipline, and investor interest. Indeed, consolidation is likely to result in substantial M&A activity amongst mid-tier companies. Smaller companies may be able to prosper by adopting a steel finishing or niche market strategy. In the aluminium sector we expect to see the both upstream and downstream M&A activity.
How PricewaterhouseCoopers can help you
Successful deals are as much an art as a science, whether acquiring a company, disposing or merging businesses. While market conditions will always have an effect on deal success, having an actively managed process from beginning to end can help ensure that the value of each opportunity is maximised. PwC’s UK Corporate Finance team completed over 200 deals totalling more than US$24 billion in 2004 and was named Mid-market Adviser of the Year at the Acquisitions Monthly Awards 2005. We offer the metals industry a continuum of deal services — from deal strategy validation, to financial due diligence and post deal services — designed to address the underlying reasons so many deals fail to reach their full potential.
