The explosive industrial development worldwide placed new demands that the small, craft-driven works in Sweden could not meet. To operate a works, regulated water power, large-scale operations, and efficient transportation systems were required.

In 1872, Hjalmar Petre and Hampus August Cornelius purchased Stora Kopparbergs Avesta Works with the associated waterfalls and properties. In 1873, they formed Avesta-Garpenberg AB, with Cornelius as CEO and plant manager. At the site, there were buildings from the closed copperworks as well as a smaller bar iron forge. The company was not interested in the old buildings and immediately began planning and constructing the new large ironworks.

It was a period of economic prosperity when the new ironworks was established, and the calculations were based on continued high revenues. In 1878, Sweden underwent a financial crisis, which was a direct result of large investments made in areas that could not provide profitability within a reasonable time. In 1879, Avesta-Garpenberg AB went bankrupt. After the bankruptcy, Cornelius was appointed to continue overseeing the operations under the new owners, Jernkontoret and Norrköpings Enskilda Bank. In 1883, Avesta Jernverk AB was founded with Jernkontoret as the majority shareholder. One of the minority shareholders at that time was Axel Johnson. In 1905, Axel Johnson acquired the majority of shares, and from 1910, the ironworks became entirely Johnson-owned.