According to a recent report by EY, the global
deal value for mining and metals M&A increased by 93% in the
second quarter of 2016. Global M&A deal value in Q2 2016 was up
US$3.7 billion to US$7.8 billion, almost double the US$4.1 billion
in deals the mining and metals sector saw in Q1 2016. The sector
also saw deal volume rise 27% from Q1 2016 and 13%
This increased activity is good news for a sector that has seen
a sustained downward trend in deal activity over the
past five years. EY suggests that growing confidence in the
mining and metals sector may be the cause of increased activity in
Q2 2016 and that mining and metals companies are looking to
strengthen their balance sheets and increase flexibility by
reducing their portfolios through strategic divestures.
Mining Review Africa quotes Quintin Hobbs,
Mining and Metals Transactions Director at EY, as saying, "As
we have seen some commodity price stability return, this has
resulted in a decline in expectation gaps between buyers and
sellers and a reduced price gap is reflected in the rise in numbers
for M&A mining and metals deal activity globally and locally.
There may be further room to indicate a more positive outlook for
Geographically, Asia-Pacific saw the highest M&A deal value
in the mining and metals sector in Q2 2016, with a combined deal
value of US$3.6 billion, and North America saw the greatest deal
volume at 56 deals, coming largely from mid-market consolidation in
the gold sector. This continues the 2015 trend in which Asia-Pacific based
acquirers were the highest-value dealmakers and North American
acquirers were the most prolific.
However, market uncertainty remains. EY implies that the large
increase in Q2 2016 may be due to weak numbers in Q1 2016 and
points out that year-over-year numbers are down 51% from Q2 2015
(due in part to the 2015 BHP Billiton demerger). It is yet to be
seen if the bottom of the market has finally been reached and if Q2
2016 is the beginning of an upward trend in mining and metals
M&A deal activity.
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