by Simon Reed, Partner, Perth
Looking back at the public M&A activity in the last 6 months, the mining and energy sectors clearly stand out accounting for almost half of all deals.
But what does this all mean? What do numbers and stats really tell us?
Well, they tell us that even though total deal numbers are slightly down on previous years (57 public M&A deals announced, compared to 75 deals in the same period in FY2011), energy and resources is still dominant. They tell us that there’s been significant activity at the upper end of the market, where in the mining sector 35% of transactions exceeded $500 million in value (this is even higher in the energy sector – which includes coal plays – where 60% of the deals announced related to targets of $500 million or more in value). Some notable deals were the bids for Anvil Mining and Sundance Resources as well as the proposed merger of Aston Resources and Whitehaven Coal.
They tell us that Western Australia continues to play a key role in the public M&A activity, with the majority of targeted companies having projects either in Western Australia or Africa. Of the 17 resources deals announced in the first half of FY2012, 53% had primary assets located in Western Australia. 35% of those targets had assets located in Africa – a trend we expect to see grow.
They also show us a couple of interesting trends that have emerged in how mining M&A is being executed: the strong preference in the resources sector is to undertake friendly deals with target board support. 70% of resources deals have been launched with target board support – contrast this to the energy sector, where the vast majority of transactions have been initiated as hostile deals.
Finally, against a backdrop of stronger preferences for cash consideration in public M&A generally, the resources sector continues to show an appetite for scrip consideration, with resources deals being launched with an equal preference for scrip or cash.