PERTH (miningweekly.com) – Despite an increase in commodity prices and higher deal volumes during the third quarter, global merger and acquisition deal value remained flat at $7.9-billion, advisory firm Ernst & Young (EY) reported on Monday.
In its latest report, ‘Mining Through the Cycle’, EY noted that the overall transaction value in the first nine months of the year declined by 43% year-on-year.
Deal volume for the third quarter increased by 12%, to 121 deals, compared with the second quarter of the year.
While gold is perpetually the most targeted commodity by deal volume, with over one-third of all deals in the third quarter targeting the yellow metal, the highest value deal this quarter was the completion of Anglo American’s sale of its niobium and phosphates assets to China Molybdenum for nearly $1.5-billion.
China was the highest value dealmaker, being the target of $2.4-billion and acquirer of $3.8-billion worth of deals. Canada was the most prolific as the target of 29 and acquirer of 37 deals.
In terms of raising capital, EY noted that this had been in steady decline since 2013.
Total capital raised during the third quarter declined by 17% to $49.9-billion, down from the $60-billion in the second quarter. Capital raised during the nine months decreased by 3% on the previous corresponding period, to $172.2-billion.
EY said in its report that the decline in capital raisings did not necessarily reflect worsening conditions in the sector, but could indicate an improvement in commodity prices over the last two quarters, which had eased the need for refinancing.
“The outlook remains very challenging for equity markets, with no sign of change in investor sentiment on the horizon. This will restrict growth capital to debt markets, alternative forms of finance and private capital.
“With the industry generally benefiting from some recovery in commodity prices during the third quarter, the picture is an improving one, but we believe there is still a long way to go before we see a return of significant risk capital to the sector,” EY said.