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

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

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.

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.

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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