NEW YORK Merger and
acquisition (M&A) activity slowed dramatically in the
global metals and mining industry in 2012, and that trend is
unlikely to change in 2013 as companies throughout the supply
chain maintain a cautious outlook, according to a
PricewaterhouseCoopers LLP (PwC) executive.
"From talking with our metals
clients, and more specifically our steel clients, the biggest
concern is the general economy. I think ... theyre
cautiously optimistic about what 2013 has in store," Sean
Hoover, metals leader for the companys U.S. industrial
products practice, told AMM.
In 2012, the metals sector was
on track to experience a year-over-year decline of up to 50
percent in total M&A deal value, according to a report by
New York-based PwC.
And according to Hoover, that
hesitancy to close on major M&A opportunities likely will
persist as the new year takes hold. "I cant say
weve seen any real change in M&A activity yet. I
think the general trend is an uncertainty in 2013 around
M&A activity," he said, noting that "the recession and the
sovereign debt issues in Europe" and "the general kind of
uncertainty in the economy domestically" are two main factors
keeping would-be buyers at bay.
Hoover said most PwC metals
clients in the United Statesincluding major aluminum and
steel companiesarent planning any mega-deals in
2013. "I think its hesitation all around," he said.
Nonetheless, most metals
executives are keeping their eyes open because they could be
encouraged to make a move if the right opportunity presents
itself, Hoover said. "Talking to some of the executives, I
think everyone is looking to be opportunistic. A lot of these
metals companies are building up substantial cash balances.
There are definitely companies that are financially in a better
position to take advantage of an M&A opportunity, but the
message were getting is, No specific plans.
Well be opportunistic if we can behere and
there(and) we might be able to get some cheap assets if
it makes some sense."
Deals that might attract even a
cautious companys eye are primarily vertical integration
opportunities, "particularly steel manufacturers, given the
commodity volatility weve experienced the last couple of
years," Hoover said. "Weve also heard about (companies)
looking for opportunities to get access to new markets (and)
add capacity where it makes sense, (but) I cant say
weve really heard a consistent theme other than
theres a lot of uncertainty and, If the right
assets come at the right price, wed be
With most metals companies
sitting out of M&A activity for the time being, more
companies are honing in on research and development
opportunities. "Theyre taking this as an opportunity to
focus on innovation," Hoover said, citing low-cost energy in
particular as a hot topic on many metals companies minds.
"It makes sense. If M&A activity is on the sidelines,
youve got excess cash to deploy in a way that makes