Q1 2012 value and volume down, but increased number of megadeals reveals
appetite for deals
VANCOUVER, June 5, 2012 /CNW/ - Canada topped the global mining and
metals sector as the number one target destination by total deal value
in Q1 2012, says Ernst & Young.
"Canada is fast becoming a go-to destination for mining and metals
transactions as companies around the world look for a secure and stable
environment amid ongoing market and political volatility," says Richard
Crosson, Partner in Ernst & Young's Transaction Advisory Services
practice. "We've seen a number of deals, many being small domestic
transactions targeting junior explorers and exploration properties."
While continued uncertainty saw global mining and metals deal volume and
value decrease by 34% and 20% respectively year over year, a strong
pipeline indicates mining companies are showing an appetite to do
deals. In fact, mining and metals companies completed 10 megadeals —
deals over US$1 billion — in Q1 2012, twice as many as in the same
period in 2011.
"The global market is active at both ends of the transaction scale, with
a greater number of megadeals in Q1 2012 compared to Q1 2011 but with a
lower average deal size," says Crosson. "These deals are being driven
by the scarcity of large, quality assets and fierce competition for
them." The large number of smaller deals — the average deal size for
the quarter being US$130 million, down from US$134 million in Q1 2011 —
reflects an increasing interest in exploration projects.
"The need to secure raw materials, increase penetration in growth
markets, achieve greater vertical integration and consolidate market
share will continue to drive M&A this year," says Crosson. "Canadian
mining and metals companies, unwilling to postpone their growth agenda,
are prepared to act opportunistically and strategically."
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 152,000 people are united by our
shared values and an unwavering commitment to quality. We make a
difference by helping our people, our clients and our wider communities
achieve their potential.
For more information, please visit ey.com/ca.
Ernst & Young refers to the global organization of 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 further information:
604 648 3607
514 874 4308
416 943 7121