Insight

Metals Newsletter

M&A activity and industry trends

Ford Phillips

Ford Phillips

Managing Director, Corporate Finance, KPMG US

+1 312-665-1537

AI Is Progressing At Bullet Train Speeds

No Industry Is Safe From The AI Revolution

  • Artificial intelligence (AI) has reached an inflection point in development allowing the technology to permeate all walks of life and every industry, driving innovation disrupting previously unassailable firms and competitive moats in the process. Analogous to how a confluence of the computer revolution, microprocessors and the internet gave way to Marc Andreesen’s “software is eating the world” declaration in in 2011, mobile smartphones, global internet, and neural networks have laid the groundwork for AI to revolutionize the global economy across multiple industries for the next decade.1
  • Cognizant of this trend, technology’s titans including Google, Meta, Apple, and Tesla have been racing to build advanced AI models. In 2020, Google’s DeepMind AI team broke biology’s legendary protein folding problem. In July 2022 the DeepMind team followed this breakthrough up by announcing they had predicted the structure of nearly all known proteins to science. One standalone firm in the AI heavyweight mix is OpenAI, which raised over $1 billion from Microsoft in 2019. Below is a transcript of one conversation with OpenAI’s text-davinci-003 model and paintings created by OpenAI’s DALLŸE model. One can see why Microsoft is reported to be in advanced talks to double down on their OpenAI investment in the coming months.
  • Advanced models such as GPT-3 have now crossed a threshold where chief marketing and revenue officers at leading companies would be wise to map out a strategic plan for 2023 that infuses their growth marketing and customer experience interactions with AI.

OpenAI’s GPT-3 Model Responses To Questions (In Green Highlights)

  

OpenAI’s DALL E Responses To Prompts

  

Metals Market Commentary

Trading multiples(1) for the Metals sector as of 03/31/2023 recorded an overall mean EV / 2023E EBITDA of 6.7x:

  • Mills & Foundries at 7.2x
  • Processing & Distribution at 7.3x
  • Recycling & Reclamation at 6.6x
  • Manufacturing & Fabrication at 5.6x

Aggregate revenue is forecasted to grow by a CAGR of +1.8% during 2021-2024 across the Metals peer group

Customer Experience (CX)

  • Messaging replacing the need for most surveys and reviews use cases
  • CX TAM is $60 billion1
   

  

Social Experience (SX)

  • Passive data gathering and social listening will be disrupted by active conversations with prospective, existing, and former customers
  • SX TAM is $50 billion+4

  
   

Messaging Experience (MX)

  • Total Addressable Market in 2022 is $60 billion5
 
 

 

  

 

Experience Management^2 XM^2

 

  

   
  • The next level of XM will incorporate MX across the key XM categories and grow to look more like a trusted AI advisor, than a disparate data gathering, crunching andeporting system
   

Digital Experience(DX)

  • Messaging augmenting and eventually become the best-in class version of website and online search
  • DX TAM is $25 billion3

  

Employee Experience(EX)

  • Always on messaging capabilities to neutral AI have the potential to collect dramatically more and in real-time feedback from employees
  • EX TAM is $10 billion2
  

Experience Management^2 XM^2  

Customer Experience (CX)

  • Messaging replacing the need for most surveys and reviews use cases
  • CX TAM is $60 billion1

Social Experience (SX)

  • Passive data gathering and social listening will be disrupted by active conversations with prospective, existing, and former customers
  • SX TAM is $50 billion+4

Messaging Experience (MX)

  • Total Addressable Market in 2022 is $60 billion5
   
  • The next level of XM will incorporate MX across the key XM categories and grow to look more like a trusted AI advisor, than a disparate data gathering, crunching andeporting system

Digital Experience(DX)

  • Messaging augmenting and eventually become the best-in class version of website and online search
  • DX TAM is $25 billion3

Employee Experience (EX)

  • Always on messaging capabilities to neutral AI have the potential to collect dramatically more and in real-time feedback from employees
  • EX TAM is $10 billion2


Driven by an economic environment of looming recession and heightened inflation, metal prices closed 2022 lower than the beginning of the year. While the Russia-Ukraine war lingers to weigh on global economic activity, China’s reopening and relaxation of its zero-COVID policy has generated optimism on the demand outlook, supporting global metal prices.

Near-record low inventories and subdued imports owing to uncompetitive arbitrage and watchful ordering would also play a role in firming metal prices. Multiple price hikes posted by domestic mills that witnessed a reversal in their earnings in 2022 are pushing prices further.

Although the U.S. Manufacturing Purchasing Managers Index (PMI) is currently hovering at low levels, infrastructure spending and the automotive sector are expected to be the bright spots in the coming years. The $1.2 trillion U.S. Infrastructure Bill, aimed to add new funding for metal-intensive activities such as bridge rehabilitation, public transportation upgrades, and electric grid modernization, is expected to fuel demand. Non-residential construction should remain robust driven by the need for schools, hospitals, malls, and other commercial buildings to support residential communities. The automotive sector is poised to maintain  positive momentum on the back of unmet, latent demand and easing supply chain constraints, albeit at a slower pace given shrinking wallet size and increased borrowing rates.

Various federal government measures, such as the ‘Buy America’ campaign and metal import duties, are helping ensure continued demand for domestically produced metals. Furthermore, an acceleration of reshoring trends would boost revenues for metal companies as construction of advanced manufacturing facilities is highly steel intensive. Local small-to-mid-sized fabricators are also expected to profit from these facilities requiring custom metal services.

     

     

     

     

 

New Sales $s

(CRO + CMO)

 

     

     


XM2

 

     

 

Positive Word of Mouth

(CMO + CXO)

  

     

     

 

Net Existing Customer $s

(CMO + CXO)

  

     

   

Customer Experience (CX)

  • Messaging replacing the need for most surveys and reviews use cases
  • CX TAM is $60 billion1

Social Experience (SX)

  • Passive data gathering and social listening will be disrupted by active conversations with prospective, existing, and former customers
  • SX TAM is $50 billion+4

Messaging Experience (MX)

  • Total Addressable Market in 2022 is $60 billion5


Experience Management^2 XM^2
 

  • The next level of XM will incorporate MX across the key XM categories and grow to look more like a trusted AI advisor, than a disparate data gathering, crunching andeporting system

Digital Experience(DX)

  • Messaging augmenting and eventually become the best-in class version of website and online search
  • DX TAM is $25 billion3

Employee Experience (EX)

  • Always on messaging capabilities to neutral AI have the potential to collect dramatically more and in real-time feedback from employees
  • EX TAM is $10 billion2
   
   

Footnotes

Sources: CapitalIQ, Company filings, Pitchbook

Notes:

  1. CX TAM is from Qualtrics’ Q3 2022 investor presentation
  2. EX TAM is from Technavio and Momentive’s August 2022 investor day presentation
  3. DX TAM is from Grandview Research and Yext’s March 2021 investor day presentation
  4. SX TAM is from Sprout Social’s Q4 2020 investor presentation
  5. MX TAM is from LivePerson’s Q3 2022 investor
  6. TAM stand for Total Addressable Market


We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below. Footnotes and sources are noted in the deck.

2022 EV / LTM EBITDA Performance(1)

2023 LTM(2) Indexed Stock Performance(1)

(1)Market statistics sourced from Capital IQ
(2)LTM as of 03/31/2023


We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below.

Technology

A consistent technology stack coordinates data collection, integration and management, enables teams to perform high quality real-time customer analytics, and effectively collaborate and consume those insights through integration with business processes

Storage & Integration | Collaboration & Consumption

    

Organization

A globally aligned operating model coordinates activity to avoid duplication, share learnings, insights and models, and build digital literacy across the regions.                                                                             

Structure & Roles | Expertise & Fluency

    

    

 

Experience Management^2 XM^2

 

Strategy

The organization shares a vision for advanced analytics, drives a data-driven culture, and prioritizes the work to remain laser focused on the customer, while also executing consistently and at high quality across all regions.

Vision & Culture | Execution & Alignment

   

Data

Internal and external data required to understand customer needs and issues are collected, made accessible to the right teams, and are maintained at high quality.

Policies & Access | Management & Quality

    

Insights

Models and analytics are monitored to ensure value delivery, effective business process implementation, and appropriate governance, risk and controls.

Scalability & Controls | Value & Usability


We hope you find this information valuable, and as always, feel free to reach out if you would like to discuss in further detail. To read the full report, download the PDF below.


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