TORONTO — It’s not a surprise, but recent figures released by PricewaterhouseCoopers confirm that the current global financial crisis and economic slowdown contributed to a significant decrease in deal value in the global metals industry during the first three quarters of this year.
Total deal values lagged in 2008, totaling only $72.2 billion during the first three quarters, indicating that deal value will not surpass last year’s total of $298.2 billion. An absence of large deal (at least $10 billion) announcements coupled with a significant decline in average deal value, were the major contributors to the overall decline in total deal value.
The 16 transactions announced during the first three quarters with disclosed values between $500 million and $1 billion remain ahead of the number of deals that fell into this range during the 2006 (16 deals) and 2007 (19 deals).
Consistent with previous quarters, strategic investors remain in the forefront of deal making in the global metals industry, accounting for the majority (80%) of announced deal value during the first three quarters of 2008. Given the current economic crisis, the PwC report (www.pwc.com/metals) also stated that financial investors are likely to continue to shy away from the deal table, clearing the way for strategic investors, which claimed 93% of announced deal value in 2007.
A quick look at the world shows that firms in Asia and Oceania (Australia, New Zealand, Melanesia, Micronesia and Polynesia) acted as both the leading acquirers and targets in global metals deals that took place during the first three quarters of 2008, accounting for nearly half (45%) of all deal targets and 47% of acquiring organizations in deals worth $50 million or more.
Interest in North American targets remained strong during the first three quarters of 2008, owing in part to the weak US dollar, which attracts foreign acquirers. Transactions for targets in North America led all regions as measured by deal value and ranked second as measured by the number of deals (24), which is ahead of the pace set in 2006 and 2007.
The BRIC (Brazil, Russia, India, and China) countries have been particularly active in global metals deals during 2008. Nearly half (44%) of the 16 large deal announcements involved BRIC targets, including five deals for targets in Brazil. Furthermore, half of the large deal acquirers came from these developing regions, including five deals with acquirers from Russia, which led all nations as measured by deal value (32% of total deal value) announced during the first three quarters of 2008.