What happened

Cleveland-Cliffs (CLF -0.49%) began the month with disappointing results, followed by an audacious bid to acquire one of its largest rivals. Investors warmed to the takeover bid, but it was the disappointing results that drove the stock, sending shares of Cleveland-Cliffs down 13.4% for the month, according to data provided by S&P Global Market Intelligence.

So what

Never let it be said the steel industry is boring! Cleveland-Cliffs started the month on a downward slope after reporting earnings that missed expectations, leading investors to worry that a slowing economy is cooling demand for commodities and finished industrial products.

The company's answer to that slowdown is consolidation. Midmonth, Cleveland-Cliffs went public with a $35-per-share bid to acquire rival U.S. Steel (X -9.68%). Investors initially cheered the $7.3 billion bid as a way to drive down costs and improve market share, but that momentum faded after a competing bid from privately held Esmark raised concerns about a potential bidding war.

The month ended without much clarity about what will happen from here. Esmark appears to no longer be in the running, but on Aug. 29, U.S. Steel said it had entered into confidentially agreements with "numerous third parties" and was reviewing multiple unsolicited proposals from potential acquirers.

Now what

It is rare for acquirers, especially hostile acquirers, to see their shares rally, and perhaps we shouldn't be surprised that Cleveland-Cliffs stock quickly reversed its initial M&A gains and ended up down for the month. But a potential deal, if it gets by regulators, would make a lot of sense.

The global steelmaking business is extremely competitive, and bringing Cleveland-Cliffs and U.S. Steel together would arguably create a national champion able to better rival international competition. It would also allow the companies to trim an estimated $500 million in annual combined costs.

Cleveland-Cliffs got a potential boost late in the month when it reached a tentative agreement with the United Steelworkers on a new three-year labor agreement. The new contract does not specifically have to do with the U.S. Steel bid, but it does suggest the company has a strong line of communications with its most important union that will be needed if a deal is eventually consummated. 

It is far too soon to say whether Cleveland-Cliffs will win U.S. Steel, or where the economy will go from here. Investors interested in buying in should be warned that in the near term, there is a lot of potential volatility around this stock.