M&A and capital raising in mining & metals: the CFO perspective
This study provides an in-depth analysis of the major global mining and metals transactions, capital markets and resulting capital flows, by considering mergers and acquisitions (M&A), initial public offerings (IPOs), secondary equity offerings, bonds and loans. It also provides an analytical breakdown by country and commodity.
We want to help you get to the insight you need as quickly as possible. This CFO perspective is one in our series of summaries of EY reports that focus on the implications for the CFO and future finance leader.
What are the implications for CFOs?
A more stable economic outlook may accelerate the shift back to growth
During 2013, earnings are likely to strengthen across the mid- and large-cap producers as projects come to market, as cost-savings programs begin yielding results and as metals prices strengthen. This will start to give both the sector and investors confidence and encourage greater corporate activity.
Together with boards and management teams, CFOs must determine the pace with which this shift should take place, and consider how and where to allocate capital to secure the best returns. For example, organic growth compared to growth by M&A.
Four priorities for CFOs
- CFOs must strike the balance between long-term growth and demands for returns on capital
Companies need to ensure the right balance between a focus on short-term returns and investment in longer-term growth. In particular, CFOs must explore smarter capital restructuring programs to strengthen balance sheets. They should also determine the extent to which capital can be returned to shareholders and weigh this up against the need to fund long-term growth plans.
- CFOs must constantly evaluate M&A opportunities
Although M&A volumes remain depressed, this does not mean that CFOs should ignore opportunities to make acquisitions. Competition for quality assets, value-adding mid-tier acquisitions and opportunistic deals will be strong. CFOs should also assess the scope for deals that reduce overall cash costs and have a low infrastructure burden.
- CFOs must prioritize careful portfolio management and optimization
CFOs must maintain their focus on capital recycling and portfolio optimization to reduce costs, release capital, ensure credit rating quality or improve valuations. This could include a review of portfolios to determine whether to divest assets.
By taking a structured, strategic approach to portfolio management, CFOs can help to create leaner business models and stronger balance sheets that can lay the foundations for future growth plans.
- CFOs must explore the full range of funding options
Finance leaders need a thorough understanding of the range of funding structures and sources available. This can help them to diversify sources and types of funding, drive efficiency and limit exposure, or loss of control, to any one single party.
The shift from traditional to non-traditional capital providers continues to shape the capital-raising environment. As a result, capital-raising options are becoming broader, particularly for mid-tier and advanced junior mining and metal companies.