Mining M&A resurgence in 2017 on the back of coal

Australia’s mining industry is tipped to see a surge in mergers and acquisitions in 2017 after the value of deals in 2016 plunged to a decade low.

The 73 per cent fall in the value of industry deals in 2016 to the low of $US3.5 billion was offset by a volume increase of 41 per cent, primarily consisting of small gold sector deals.

Paul Murphy from Ernst&Young said the downturn was perversely driven by increasing commodity prices.

‘Because commodity prices rebounded so quickly and strongly, where there were assets for sale, a value gap emerged.

‘The sellers were re-evaluating their expectations and the buyers were stuck in their initial pricing expectations and so the deals didn’t get done.

‘Because bulk commodity prices have been so strong for quite a few months, that will give rise to deals.

‘Stability allows companies to narrow that value gap and so we expect to see quite a few deals this year, especially in the coal space in Australia.

‘Already, the 2017 calendar year M&A numbers are looking strong.’

China has solidified its position as a big player globally, more than doubling the value of acquisitions in 2016, accounting for almost a fifth of global deal volume.

Chinese acquirers were responsible for four of the top 10 deals, with the Asia-Pacific region accounting for half of global deal volume.