http://www.canadianmanufacturing.com/
TORONTO and MONTRÉAL—Canada’s mining sector will see a new era in mergers and acquisitions (M&A) as a near perfect alignment of factors takes place, according to a study released by advisory firm Grant Thornton.
Following last year’s tepid M&A performance in which deal volumes failed to breach the $90 billion mark, Grant Thornton’s report Gathering Momentum suggests a fertile environment will lead to a doubling in the value of M&A in the mining sector compared to 2013.
The resurgence of M&A is predicted to come from four main factors identified through feedback from 250 senior mining executives:
- One-in-ten junior mining exploration companies are likely to enter administration, and a quarter of major mining companies anticipate challenges with financial covenants, resulting in significant numbers of distressed assets and low valuations
- Excellent environment for matchmaking, with a third of executives at mining companies looking to make an acquisition (35 per cent of junior mining exploration companies and 32 per cent of major companies)
- Approximately the same amount of firms are showing an appetite for selling (36 per cent of junior mining exploration companies and 27 per cent of larger companies)
- Lower commodity prices will be a driver for M&A, pushing companies to band together to generate scale and lower productions costs
“The mining sector is ripe for a resurgence in M&A activity. We’ve started to see elements of this emerge already,” says Jeremy Jagt, national mining leader at Grant Thornton Canada. “Executives at mining companies are telling us that they are in the market to make acquisitions and a near equal proportion say they will sell their mining company, or parts of it, this year. So there is plenty of opportunity for doing deals, especially for those looking to seize opportunities with distressed sellers ahead of any improvement in the metals market.”
Jagt added that the return of private equity interest have now raised around $8 billion in capital and are looking for opportunities in mining.
Click here for report: http://www.rcgt.com/wp-content/blogs.dir/2/files/2014/11/Rapport-minier-2014_a.pdf
For the rest of this article, click here: http://www.canadianmanufacturing.com/financing/mining-sector-ripe-increased-ma-activity-report-142226/