Insight

Metals Newsletter Q4 2023

Read more about M&A activity and trends in the sector

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

  

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

Metals Market Commentary

Navigating a macroenvironment in 2023 that featured volatile metal prices, monetary tightening, and weaker consumption, metal companies remain cautiously optimistic regarding long- term demand prospects. Growing infrastructure investment, strengthening commercial construction, as well as the continued post-pandemic recovery in the automotive industry has sustained momentum through the year.

The initial months of Q4’23 saw subdued vehicle production due to the United Auto Workers (UAW) strike. However, with deferred demand returning given the settlement, metal prices trended upward.

While the U.S. Manufacturing Purchasing Managers’ Index (PMI) remains in contraction, the Federal Infrastructure Bill and Inflation Reduction Act (IRA) are projected to spur a variety of metal-intensive public utility rehabilitation, electrification, and clean energy projects, all fueling manufacturing activity and eventually rebounding the PMI.

Further, reshoring efforts, supported by the CHIPS Act, are set to provide a boost to industrial and commercial construction, providing a strong tailwind for metal prices.

Q4’23 Highlights

 

Deal Count1: 66


Q4’23 v. Q4’22
Deal Count: +61%


Q4’23 v. Q4’22
EV / LTM EBITDA2: +2.5x

     

     

     

     

 

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.

With mounting global focus on sustainability and the Federal Buy Clean Initiative gaining strength, secondary raw material continues to gain favor in manufacturing processes, driving demand for scrap metal.

Looking ahead to 2024, expectations of moderating inflationary pressures and a decline in interest rates are anticipated to increase public and private consumption, business spending, and capital investment. According to recent estimates by the World Steel Association, steel demand in the U.S. is expected to grow by 1.6% in 2024, with a projected global increase of 1.9%.

U.S. Metals Sector M&A Trend by Segment (1)

U.S. Metals Sector Deal Activity by Buyer Type (1)


Sources: KPMG Analysis, Capital IQ, Mergermarket, Pitchbook, Equity Research Reports, and other publicly available sources.

Footnote

  1. Deal Count / Volume represents announced transactions
  2. Mean valuation multiple of select public companies in the metals industry


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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