Mergers and acquisitions in the metals sector
Service centres are striking deals
Merger and acquisition (M&A) activity in the metals sector has been on the rise. This is especially true for service centres, the primary purchasers of metal from steel and aluminum mills. As metal processors and distributors, service centres are seeing a convergence of three key M&A drivers:
Shifting industry dynamics. Service centres are working to maintain margins and fuel long-term volume growth through strategic acquisitions. Yet, rising competition from the steel mills comes at a time when many service centre owners are contemplating retirement. Taken together, these trends have created a wave of motivated buyers and sellers.
Market liquidity. An increase in available capital from both global mills and private equity firms has resulted in significant market liquidity.
Valuations at long-term average. Notably, valuations of service centres are also near the long-term average, which means the expectations of both buyers and sellers are closely aligned.
In this article, “Conditions ideal for service centre mergers and acquisitions,” John Jazwinski, national leader for primary metals in Deloitte’s Financial Advisory practice, examines these conditions to explain how they are combining to foster a favourable environment for service centre mergers and acquisitions.
This article was originally published in Metal Center News, January 2007.