Consolidation wave: Global metals outlookPart three in a three-part series on the future of the global metals industry |
The worldwide economic downturn has slowed the rapid rate of consolidation the global metals industry has seen for the past few years, with merger and acquisition (M&A) activity grinding almost to a halt. Companies are tightening their belts, conserving their cash, and generally taking a wait-and-see approach to acquisitions. Yet, today’s market might present an unprecedented opportunity for buying up critical assets at bargain prices.
Deloitte Touche Tohmatsu Limited’s Global Manufacturing Industry Group asked Daniel T. Schweller, global metals M&A leader, to talk about what the future holds – and if it includes a wave of consolidation. The report entitled “Consolidation wave: Global metals outlook” provides a unique perspective on the slowdown in the consolidation activity, and insight into the deals that are still happening. In addition, the report summarizes the interest in the countries of Brazil, Russia, India, and China (BRIC) as the top geographic regions for metals deals. The buyers with solid cash positions will be looking to purchase smaller, non-core or distressed assets.
The report first focuses on the impact of the financial crisis causing companies to withdraw from external activities and focus on leveraging the operations they currently own. Many companies still have strong cash positions which will enable them to purchase distressed assets. Smaller deals may be made for viable assets as industry players trade “non-core” facilities. In the short-term, companies may place a great focus on achieving synergies from past deals which may help to generate cash.
Secondly, “Consolidation wave” shares information on China’s significant consolidation activity in creating the largest steel company in the country. The BRIC countries and the U.S. should attract aspiring global steel players.
Finally, the report does offer a glimpse of optimism that consolidation will inevitably regain its steam due to two significant actions including: demand for meaningful purchases and ramp up of production in an attempt to capture as much volume as possible. There are international barriers, however, that could impact deals, but regulatory obstacles will be addressed by global marketplace pressures on countries that have protectionist policies.
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Consolidation wave: Global metals outlook
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