M&A and capital raising in mining & metals: 3Q/9M 2013

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M&A and capital raising trends – 3Q/9M 2013

Widespread deal inertia and a seemingly unbridgeable gap between buyer and seller price expectations have contributed to a further decline in deal volume and value over 3Q 2013.

Y-o-y deal value fell 22% over 9M 2013, when excluding the Glencore Xstrata deal.

Only one mega deal closed during 3Q 2013, compared with 12 over the first half. Most of the industry remains cautious and introspective, while the many non-core divestments that have been announced have yet to close.

M&A overview

  9M Y-o-Y change 2013
  2011 2012 2012 2013 9M 13 9M 13* 1Q 2Q* 3Q
Volume 1,008 941 706 537 -24% -24% 186 185 165
Value ($m) 162,439 104,014 75,852 96,928 28% -22% 18,161 33,334 7,994
Average value ($m) 161 111 107 180 68% 3% 98 180 48
Cross border (share of volume) 48% 52% 53% 43%     47% 46% 33%
Median value ($m) 5.6 5.0 5.0 4.1 -20%        

* Excluding merger between Glencore International and Xstrata

EY - Mining and metals capital raising

Equity markets remain challenging, with junior follow-on proceeds and IPO volumes remaining at historic lows. This continues to create opportunities for alternative finance and private capital providers. Financial investors took an increased share of total deal value in 9M 2013.

In the debt markets, uncertainty surrounding the timetable for tapering of quantitative easing by the US Federal Reserve has created further volatility. This impacted appetite for emerging market and sub-investment grade debt in particular, leading to a significant decline in 3Q 2013 bond issuance and proceeds.

Gold continues to be the single most targeted commodity by volume, with 55 deals concluded in 3Q 2013 and 182 over 9M 2013. A quarter of 3Q 2013 gold acquisitions were by financial investors.

EY - Mining deal value by commodity

North America has moved ahead as the most acquisitive region in 9M 2013, excluding the Europe-based Glencore Xstrata deal.

Asia-Pacific was the most acquisitive region in the third quarter, primarily the result of domestic gold and steel acquisitions in China and Australia.

North America remained the most sought-after region by deal value. Of the $21.2b North America deals in 9M 2013, $18.9b (89%) were domestic transactions, primarily targeting gold.

EY - Mining deal value by target region

Asia-Pacific took the lead in deal volume, while investment into emerging regions continued to decline as mining and metals companies focus on managing risk.

Deal values in Africa in 9M 2013 reached just $1.6b, compared with $17.1b during the same period in 2012.

The value of Latin American deals dropped to $2.0b in 9M 2013 from $12.3b in 9M 2012.

 

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* Excluding merger between Glencore International and Xstrata

Capital raised, by asset class ($b)

EY - Mining and metals capital raising ×

Value of deals by target commodity ($b, 9M 2013)

EY - Mining deal value by commodity
* Excludes merger between Glencore International and Xstrata. Other includes potash/phosphate, diamonds, PGMs, minor metals, etc. ×

Value of deals by target region ($b, 9M 2013)

EY - Mining deal value by target region
* Excluding merger between Glencore International and Xstrata. ×