M&A Deals Decline in Metals and Mining Industry in First Nine Months of 2012, Report Says

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Researched by Industrial Info Resources (Sugar Land, Texas)--The economic crisis in the Euro zone, a gloomy outlook for the world economy, and decreasing investment sentiment have resulted in an evaporation of mergers and acquisitions (M&A) in the metals and mining sector. According to a global M&A report from consultancy firm Ernst & Young, the number of deals completed in first nine months of this year dropped 16% to 684. The total sum of all those deals dropped 43% to $76.8 billion, with an average deal size of $112 million.

The report did not include the megadeal of Rosneft-TNK-BP. In late October, Russian state-owned energy firm Rosneft (Moscow, Russia) agreed to acquire the whole of TNK-BP (Moscow) for an amount of $55 billion.

Coal dominated the merger and acquisitions activity with a value of $14.8 billion, which equals 20% of the overall deal value. Copper was the second commodity at $12.5 billion, driven by the strong demand fundamentals. In volume terms, gold was the most targeted commodity with 227 deals, which equals $9.1 billion in value terms. Steel, rare earths and uranium deals increased in the first nine months of this year.

"Global annual capital-raising activity is set to decline for the first year since 2009, with a fall in proceeds in all asset classes, except bonds, in the first nine months of this year," the report said. "The 37% fall in year on year proceeds to $174 billion reflects a combination of challenging equity markets."

Ernst & Young also released its global capital confidence barometer for mining and metals for the first time, showing that only 38% of the mining and metals companies polled in a survey were focused on growth, compared with 53% that were focused on growth in April. The survey was based on 149 respondents from mining and metals companies in 41 countries. Almost a third of respondents now view cost reduction and operational efficiency as key focus areas for the next 12 months, the consultancy added.

The value of initial public offerings and the volume of initial public offerings (IPOs) were down 82% and 47%, respectively, during the first nine months of the year, E&Y said.

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