Canada maintains high stake in global M&A activity
VANCOUVER, Feb. 21, 2013 /CNW/ - Canadian mining deal value and volume
fell 37% and 19%, respectively, year over year in 2012, but activity is
set to pick up in the year ahead, according to Ernst & Young's new
report Mergers, acquisitions and capital raising in mining and metals: 2012
trends, 2013 outlook.
"Despite mirroring the global decline in deal value and volume, Canada
maintained an 18% share of global mining and metals M&A value and 37%
of global volume in 2012," says Bruce Sprague, Ernst & Young's National
Mining and Metals leader. "We saw a number of mid-tier and junior
executives maintain confidence to pursue acquisitions despite turbulent
times — a drive that's set to continue in 2013."
This appetite also contributed to a rise in Canadian outbound investment
volume, with many companies pursuing large, cross-border strategic
acquisitions to expand existing operations.
Meanwhile, rising costs, softer commodity prices and project execution
challenges have mining and metals companies renewing their focus on
cost savings, capital optimization and shedding non-core or
underperforming assets until commodity prices recover sufficiently to
encourage new investment.
"Mining and metals companies around the world are managing a number of
macroeconomic factors," says Sprague. "We've seen these factors dampen
deal appetite here at home — and abroad."
The report reveals the downturn in Canadian deal value and volume is
part of a broader global trend. Global transactions value and volume
declined by 36% and 7%, respectively, from 2011 — with the lowest
number of deals since 2008 and the smallest by value since 2009. But
the tide is turning, Sprague says.
"Over the next year, we expect to see investment increase at a slower
pace, with the majority of Canadian companies doing deals looking to
scale-up existing operations by acquiring 'de-risked' assets," says
Sprague. "These companies are also looking close to home for potential
targets, with Latin American countries such as Peru, Chile and Mexico
at the top of the investment destination list."
The Canada-China Foreign Investment Protection and Promotion Agreement
is also expected to reignite Chinese state-owned enterprise interest in
the country's resources sector, as Canada looks to stimulate economic
growth in a move that will help offset ailing inbound investment from
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SOURCE: Ernst & Young
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