Q2 mining and metals M&A deal value doubles quarter-on-quarter


Q2 mining and metals M&A deal value doubles quarter-on-quarter

29 Jul, 2016 Michael Peters  

JOHANNESBURG (miningweekly.com) – Despite a 93% quarter-on-quarter uptick in mining and metals mergers and acquisitions (M&A) deal value in the second quarter, suggesting growing confidence in the sector, deal value year-on-year is 51% down on the second quarter of last year, with deal activity predicted to remain rocky in the coming months.

Assurance, tax, transaction and advisory services firm EY on Friday reported that global mining and metals M&A deal value nearly doubled from $4.1-billion in the first quarter of 2016 to $7.8-billion in the second quarter of 2016.

However, deal values in the quarter under review remained short of the overall $16-billion achieved in the second quarter of last year, which was boosted by an $8.7-billion BHP Billiton demerger.

Deal volume increased 27% quarter-on-quarter and 13% year-on-year, with 104 deals recorded during the period under review.

“Companies – especially midtiers and majors – continue to reassess and reduce portfolios to strengthen balance sheets and inject more flexibility into their business models. That, coupled with growing confidence, is translating into increased deal activity,” said EY global mining and metals transaction leader Lee Downham.

The total capital raised during the three-month period under review declined 5% quarter-on-quarter and 28% year-on-year to $60-billion; however, the number of transactions increased 30% quarter-on-quarter and 43% year-on-year to 770 transactions.

“Deal value and volume may be up in 2016, but year-over-year figures reveal the impact of recent uncertainty in the market,” he explained, pointing out that the sector continues to adjust expectations and realign portfolios in response to the current market conditions.

Asia-Pacific produced the largest share of deal value at $3.6-billion in second quarter, while North America recorded the greatest volume of deals at 56, more than half of the total global deal volume in the second quarter of 2016.

“The theme of strategic divestments continues to dominate the transaction landscape, with China demonstrating an appetite to meet vendor expectations on value for world-class assets,” Downham said.