Global mining and metals deal value remains flat in Q3 while deal volume increases 12%
London, 27 October 2016
- Deal value down 43% in first nine months of 2016 compared with last year
- China the highest value dealmaker in the third quarter
- Traditional industry acquirers still focused on portfolio realignment
Global mining and metals M&A activity remained subdued in Q3 with deal value flat at US$7.9b and deal volume up by 12% to 121 deals quarter-over-quarter, according to the EY Mining through the cycle: exchange performance comparison report. Compared with 2015, deal value declined 43% in the first nine months of 2016 despite an increase in the volume of deals.
Capital raised in the sector followed a similar decline trend in Q3. Total capital raised was US$49.9b in Q3, down 17% from US$60b in Q2.
China was the highest value dealmaker in the third quarter as the target of US$2.4b in transactions and the acquirer in US$3.8b worth of transactions ¾ representing 29% and 48% of respective global totals. This was buoyed by China Molybdenum’s US$1.5b acquisition of Anglo American’s niobium and phosphate assets in Brazil. The majority of Chinese deals were domestic (89%), reflective of significant consolidation within the region.
Lee Downham, EY Global Mining & Metals Transactions Leader, says:
“The continuing fall in M&A deal value doesn’t necessarily reflect a worsening of conditions for dealmaking in the sector. The priority for miners continues to be portfolio realignment rather than acquisitions for future growth. These divestment strategies are driving activity rather than a rush to consolidate as we saw at the peak of the super cycle.”
A number of high-value mergers on the horizon may drive some momentum across the global mining and metals sector, including that between Potash Corp. of Saskatchewan and Agrium, and the restructuring deal between Baosteel Group and Wuhan Iron & Steel Group. Portfolio realignment programs are widespread and a key driver of M&A activity, driving asset sales from Anglo American and Freeport-McMoRan, among others.
Downham says: “Efforts to reduce capital expenditure, cut costs and divest non-core assets continue to improve mining and metals companies’ financial position. As the sector becomes increasingly adept at managing volatility, we will see corporates begin to consider strategies that are more focused on future growth. This may be in the form of all-share mergers to create synergies and scale or transactions focused on creating regional diversification among the single-asset producers.”
- Ends -
Notes to Editors
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
About EY’s Global Mining & Metals Sector
With a volatile outlook for mining and metals, the global mining and metals sector is focused on margin and productivity improvements, while poised for value-based growth opportunities as they arise. The sector also faces the increased challenges of maintaining its social license to operate, balancing its talent requirements, effectively managing its capital projects and engaging with government around revenue expectations.
EY’s Global Mining & Metals Network is where people and ideas come together to help mining and metals companies meet the issues of today and anticipate those of tomorrow by developing solutions to meet these challenges. It brings together a worldwide team of professionals to help you succeed — a team with deep technical experience in providing assurance, tax, transactions and advisory services to the mining and metals sector. Ultimately it enables us to help you meet your goals and compete more effectively.
For more information, please visit ey.com/miningmetals.
About the data
All mergers and acquisitions data, and capital raising data was extracted from ThomsonONE and analyzed by EY. Only completed deals are included in the data and analysis.