PERTH (miningweekly.com) – The value of global merger and acquisition (M&A) activity in the second quarter of 2017 increased by 13% on the previous quarter, to $14.8-billion, and by some 71% on the previous quarter, advisory firm EY reported.
While deal volumes during the quarter declined slightly from 117 deals in the first quarter to 105 deals in the second quarter of 2017, the average deal value increased from $113-million to $139-million, EY’s latest figures show.
In the six months to June, the number of deals dropped from 262 to 222 compared with the previous period, while M&A deal value decreased from $29.7-billion to $28-billion.
EY noted on Friday that the share of Chinese deals dropped significantly, from almost 70% of deal value in the first quarter of 2017 to just 15%, or $2.1-billion in the second quarter.
EY noted that corporate activity across the precious metals sector drove the bulk of M&A activity during the second quarter, with midtier gold producers active in both buying and selling assets in their push for optimising operations, lowering costs and generating synergies, particularly in Latin America.
Some $2.2-billion of M&A deals were struck in the gold sector during the second quarter, while the coal sector led in terms of deal value, accounting for $2.8-billion of total M&A spend during the quarter.
EY on Friday said that it expected to see continued activity in the coal sector, with the value of such deals likely to dominate in the coming months on the back of a number of deals in progress across Australia and the US, including the pending sale of Rio Tinto subsidiary Coal & Allied.
There are also improving prospects for deals in steel outside of China, with the acquisition of ThyssenKrupp’s Brazilian business by Ternium already in the pipeline.
“Although blockbuster deals are unlikely over the coming months, we continue to expect management boards to continue to actively screen acquisitive growth deals that have the potential to create unique shareholder value.
“The improvement in balance sheets and associated concern over capital returns, will likely see shareholder pressure and, potentially, further attention from activist investors,” EY said.
Meanwhile, the advisory firm reported that global aggregate capital raised increased by 15% year-on-year to $71-billion in the second quarter of 2017, roughly $20-billion higher than proceeds recorded in the first quarter.
China’s dominance of capital raising activity has slowed, accounting for just $1.3-billion, or 7.5% of the quarter-on-quarter increase.