Topic: Infrastructure, mining and commodities

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Diamond In The Rough: Mining as a potential bright spot in M&A

The mining sector has been one of the few bright spots in Canadian M&A since the COVID-19 pandemic drastically changed the landscape for transactions, with several large deals announced and continuing despite the pandemic.

As with other business sectors, mining has been significantly impacted by regulations and the economic slowdown caused by the pandemic. However M&A opportunities for Canadian mining companies have persisted despite these issues.

One of the first significant deals announced during the COVID-19 pandemic was Endeavor Mining Corporation’s combination with SEMAFO Inc., which valued SEMAFO at $1 billion. Other recent deals include Shandong Gold Group acquiring Canadian-based … Continue Reading

Ready to rock! 2019 may see increased M&A activity among Canadian mining companies

2018 was a difficult year for Canadian mining companies. The aggregate valuation of TSX-listed miners declined by 12.7%, while equity capital raised by these companies declined by 36% from the previous year’s total. In this environment, new financings and deals have been scarce, but there is reason to believe that this trend might change in 2019, according to a recent publication by PwC.

A number of factors support the general prediction of increased M&A activity among TSX-listed mining companies. These factors include:

  • Increasing commodities prices. Spot prices for based and precious metals decreased across the board in 2018. However,
Continue Reading

Beware the zombie invasion (stock exchange edition)

On September 18, Deloitte released a new report which outlines a roadmap for the competitive business climate in Canada. Included in the report is a warning that “Canada may have a zombie problem.” Luckily, Deloitte isn’t raising concern about hordes of flesh-eating undead, but rather the relatively large number of “zombie companies” that exist on Canadian stock exchanges. The report identifies “zombie companies” as those who do not have enough earnings to cover their interest payments and found that out of the 2,274 companies listed on the Toronto Stock Exchange and the TSX Venture Exchange, 16% could be considered “zombies” … Continue Reading

Note to investors: tariffs and opportunities abound in metals and manufacturing

Global trade tensions continue to be a source of uncertainty. The role of the United States as one of the most influential economies across the globe has presented limitations on the ability of many business sectors to easily absorb the trickle down effects of recent trade tariffs implemented by the Trump Administration. While this seems to present a problem for most companies that rely on international trade and distribution of products as the crux of their business, tariffs, at least if kept in place only temporarily, could create opportunities for distressed investors.

Two examples of the industries directly impacted are … Continue Reading

Q1 review: major deals lead the mining resurgence

Our 2018 Mining M&A forecast predicted that there would be an increase in Canadian mining M&A activity in 2018. It appears that our prediction may be correct: industry reports suggest an 86% increase in the value of the transactions in the first quarter of 2018 (Q1 2018), as compared to the first quarter of 2017 (Q1 2017). The increased value in deals was not accompanied by an increase in volume, however. The deal volume decreased by 16% in Q1 2018 compared to Q1 2017. While this does not perfectly follow the “small is beautiful” gold mining acquisition trend, … Continue Reading

Q1 2018 review: record deal values for the power and utilities sector

A recent report by Ernst & Young (the Report) has concluded that the power and utilities (P&U)  is thriving, as global deal value in the first quarter of 2018 reached an all-time high of US$97 billion. This rise has predominately been driven by mega-deals, with only 15 deals forming 90% of the total global deal value in the P&U sector. Owners of P&U assets can continue to expect premium asset valuations and highly favourable transaction terms as investors compete for a limited amount of attractive investment opportunities within the sector.

The Report identifies the following factors as … Continue Reading

M&A activity in Canada’s upstream oil and gas sector remains slow in 2018

Following our update during the last quarter of 2016, M&A activity in Canada’s upstream oil and gas sector continued to decline in 2017 and has remained slow during the first quarter of 2018. Globally, there was a strong start to 2017 followed by a significant decline, in terms of both deal count and overall deal value, during the balance of 2017, with a notable increase in deal activity during the first quarter of 2018.

 According to Deloitte’s Oil & Gas Mergers and Acquisitions Report–Yearend 2017, after the increase in deal spend in Q4 2016 and Q1 2017, the rest … Continue Reading

Mining M&A forecast in 2018

While global economic growth has increased in the past few years, mining M&A activity has not seen a similar increase. However, a report published by KPMG on mining M&A activity during the second half of 2017 shows that business conditions appear to have improved for the mining sector. KPMG believes that mining companies’ focus on correcting their balance sheets and winning back investors have had a positive impact on their cash accounts and have given mining companies some flexibility to become more active in acquisitions. Comparing M&A activity from July to December 2017 to that of the first half of … Continue Reading

Signs of optimism for mining, oil-and-gas M&A activity in 2018

Overall merger and acquisition deal value involving Canadian companies totalled $216.3 billion in 2017, which was approximately 14% lower than the $251.88 billion seen in 2016, which was a decade-high level. The fall in overall value was primarily caused by a 25% decline in energy deals, according to a report in Bloomberg, which resulted in the first year-over-year decline in total deal value since 2012-2013. Despite this decline, 2017 stands as one only five years since 1995 when deal value exceeded $200 billion, according to a report in the Wall Street Journal.

Outward bound M&A activity was down … Continue Reading

Mining M&A: domestic and international diligence

When contemplating any merger or acquisition, a diligence review is one of the preliminary steps an acquiring company takes to fully understand what they are purchasing beyond the underlying asset. In mining transactions specifically, this diligence process can involve agreements or considerations that are unique to this industry and may extend across international borders. Two of these unique differences, mainly the use of indigenous mining agreements and the potential for domestic liability as a result of operations abroad, are becoming commonplace in the industry and are no longer outliers. With deal volume in mining M&A reaching its highest levels since … Continue Reading

Trend report: increased M&A deal values across the Americas for Q1 2017

On April 25, Mergermarket released its Q1 2017 Regional Flash Reports describing the M&A climate, trends and developments throughout the Americas during the first quarter of 2017.

The Canada’s Trend Report indicates that Canadian M&A has remained strong with 111 deals in Q1 2017 worth US$ 35.8bn. This is a robust start for 2017 as compared to the 151 deals in Q1 2016 representing US $17.1bn, and is in line with the trend of higher valuations for fewer deals as seen across the globe. The top Canadian sector for Q1 2017 was Energy, Mining and Utilities (EMU) with … Continue Reading

Mining resurgence in M&A: proceed with caution

Earlier this year, KPMG released its Mining M&A Newsletter for the second half of 2016. According to the report, deal volume as well as deal value increased in the second half of 2016 due to a large North American merger. In fact, deal value more than doubled from the first half of 2016 to the second. In addition, for the first time in two years, the number of deals completed for producing assets grew significantly, also doubling its first half 2016 numbers.

For Canadian deals, it was reported that deal volume rose 16% in 2016, while deal value remained essentially … Continue Reading

The Canada Infrastructure Bank: big plans for big projects

Last month’s federal budget reaffirmed the government’s plans to establish a new Canada Infrastructure Bank (the Infrastructure Bank) and vest it with the responsibility of spending at least $35 billion in infrastructure over 11 years. The Infrastructure Bank is intended to pool public funds with private investments for infrastructure projects. Along the way, the Infrastructure Bank will build up expertise in packaging, financing and managing projects, so as to attract institutional investors and investment funds.

The Infrastructure Bank goes hand in hand with Prime Minister Trudeau’s desire to attract investments into Canadian infrastructure projects. In the fall of 2016Continue Reading

Canada punches above its weight-class in cross-border deals and works on attracting greenfield and other private investment

Over the past few months, the Canadian government has been working to establish a source of financing for several infrastructure projects across the country. These projects include public transit initiatives, green infrastructure, social infrastructure, and smaller tailored projects for our rural and northern communities. What makes this interesting is how Canada is sourcing the money.

Infrastructure bank to be established

The government is in the process of establishing an infrastructure bank, wherein $35 billion in public funds will be used to get the projects off the ground. The hope is that the private sector will respond with around $140 billion. … Continue Reading

Impact of parent-subsidiary liability and policy developments on M&A in the extractive sector

Until recently, Canadian parent companies in the extractive sector could be relatively confident that any risks created by the actions of their overseas subsidiaries would be reputational in nature. Between the doctrine of separate corporate personality and the tendency of Canadian courts to be unwilling to accept jurisdiction over tort claims based overseas, Canadian parent companies have traditionally faced limited legal risks from allegations of human rights or corporate social responsibility (CSR) violations allegedly perpetrated by subsidiaries overseas. Over the past several months, however, a number of developments have taken place which have undermined this insulation from liability … Continue Reading

M&A considerations for resource issuers: Canada’s Extractive Sector Transparency Measures Act

Canada’s Extractive Sector Transparency Measures Act (ESTMA, or the Act) came into force on June 1, 2015. The Act imposes disclosure obligations on certain Canadian businesses engaged in the commercial development of oil, gas or minerals with respect to payments made to domestic and foreign governmental bodies. As we previously noted, Canadian businesses subject to the Act are currently required to collect information on the payments they make, and the first ESTMA-compliant reports will be due to Natural Resources Canada by May 30, 2017 (for organizations with a December 31 financial year end).

Resource companies currently … Continue Reading

Mining M&A for 2016: digging deeper into the numbers

As discussed in our latest update on M&A activity in the mining industry, there has been a recent and substantial rise in deal volume and value in the industry. This is exciting news for mining companies that have suffered from a sustained downward trend in M&A activity as a result of low and volatile commodity prices in addition to political and business-related barriers.

A recent report (the Report) by KPMG elaborates on this recent surge in activity, focusing on each commodity, geographical region and asset (according to their stage of development) most impacted from this increase. Certain of the … Continue Reading

A global overview of M&A activity: August 2016

World MapMergerMarket Group recently published its September edition of Monthly M&A Insider which reported on mergers and acquisitions activity around the world for the month of August 2016. More than two thirds into the year, August was no exception to the recent rather sluggish growth in M&A activity, especially compared to the record-breaking year for M&A in 2015.

Global M&A

August saw a total of 946 deals worth US$182.2bn, the lowest-valued August since 2013 (US$152.7bn) and down 34.7% from August 2015’s US$278.9bn. The Energy, Mining & Utilities sector spearheaded activity by contributing 15.8% to the total global market share with 84 … Continue Reading

Positive news for mining and metals M&A

Mining Truck 2

According to a recent report by EY, the global deal value for mining and metals M&A increased by 93% in the second quarter of 2016. Global M&A deal value in Q2 2016 was up US$3.7 billion to US$7.8 billion, almost double the US$4.1 billion in deals the mining and metals sector saw in Q1 2016. The sector also saw deal volume rise 27% from Q1 2016 and 13% year-over-year.

This increased activity is good news for a sector that has seen a sustained downward trend in deal activity over the past five years. EY suggests that growing confidence in … Continue Reading

An overview of global M&A activity: 2015 into 2016

2015 was an extraordinary year for global M&A activity. Mergermarket recorded almost 17,000 transactions worth a remarkable US$4.3tn. This topped the previous record set in 2014 by over 30%. The race for top performing sector this year was very close. Energy Mining & Utilities won with US$630bn in deal value; however, the top performers were only separated by US$150bn. The other four sectors in order are: Pharma, Medical and Biotech, Consumer, Financial Services and Industrial Chemicals.

North America

Once again North American markets lead the way with almost 1/3 of global deals and nearly 50% of global deal value. The … Continue Reading

Update: Canadian M&A outlook

According to a recent report entitled “Brighter horizons: A bolder future for Canadian M&A”, Canadian M&A activity is expected to be strong in 2016. The report presents the results of a survey of 50 leading Canadian M&A professionals commissioned by Citi and conducted by Mergermarket. The study reveals that none of the respondents expect Canadian M&A to decrease in 2016, with 70% of respondents anticipating an increase in Canadian M&A for 2016 compared to 46% of respondents for the previous year. The key drivers to dealmaking in 2016 identified by respondents include low commodity prices, private equity demand, … Continue Reading

Canadian Mining Eye Index looking up in Q2

According to an Ernst and Young report released on August 24, 2015, the Canadian Mining Eye index experienced a 4% gain in Q2 2015, as compared to a 1% loss in Q1 2015. This increase was the first quarterly gain for the index since Q2 2014. While the quarterly results in the sector reported by EY were not all positive, the gain is certainly a welcome development.

EY’s Canadian Mining Eye index tracks the performance of 100 TSX and TSX Venture mid-tier and junior companies with market caps generally between CDN$100m and CDN$1.7bn. Q2 saw the Canadian Mining Eye index … Continue Reading

Global M&A in the first half of 2015

Similarly to American M&A in the first half of 2015, the first half of 2015 was remarkably active on the global mergers and acquisitions front. According to a recent Mergermarket report, total deal value topped US$1.7 trillion. This represents an increase of 15.2% over the first six months of 2014, and only 15.4% behind the record-setting first half of 2007, when US$2.1 trillion worth of deals were completed. With 7,136 transactions, it is interesting to note that total deal volume actually decreased by 15.7% compared to the same time period last year, but higher valuations explained the market’s … Continue Reading

Canadian private equity market continuing to grow in the first half of 2015

A recent Thomson Reuters report indicates the Canadian buyout-private equity market had a record first half of the year in terms of deal volume. With at least two deals valued at over $1 billion, the value of buyout-private equity deals in the first half of 2015 was also the most since 2007, up 69% over the same period last year. The record deal volume also represented a 2% increase of the year prior.

Of particular note is the proportion of overall M&A activity which is now represented by buyout-private equity deal structures. Compared to historical levels four years ago, the … Continue Reading

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