The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

In a diverging market, what path will you carve?

Mergers, acquisitions and capital raising in mining and metals – 2016 trends, 2017 outlook

A big sigh of relief can be heard across the industry that 2016 is behind us. While the year ended on a high, it started with serious financial distress and an incredibly bleak outlook. Throughout the year, global macroeconomic factors created huge uncertainty and volatility, and the disciplines instilled through this experience will no doubt continue to influence the strategies into 2017.

We expect an interesting year ahead, with many different strategies being put into action, and a cautious return to deal making and capital raising. Volatility is not going away, and there is certainly the potential for more global economic shocks. This means it’s also the time to lay foundations for sustainable growth, engender resilience and drive future shareholder returns.

For miners, now more than ever, making sure that you have the best assets in your arsenal, achieving the right mix of capital and securing optimal financing will be critical for future growth.

M&A trends and outlook

Measures to restructure balance sheets were executed quickly and efficiently in 2016 and as the year progressed, commodity prices gained a surprising and strong recovery, with equities following suit.

Persistent volatility made executing deals incredibly difficult, as did the ever-changing macroeconomic environment; it was a tough year to get deals done and this is reflected in the nature of transactions executed. While volume of deals increased from the low-base of 2015 by 33% to 477 deals in 2016, the y-o-y deal value dropped by 9% to US$44.3b, the lowest levels we have seen since 2004.

EY - Mergers and acquisitions - value and volume: 2017-2016

Key findings


of the top 10 deals were undertaken by Chinese acquirers


was the largest transaction by value in 2016


was the biggest jump in deal values - aluminium rose from US$244m in 2015 to US$3.4b in 2016

Outlook for 2017

We expect a continued upward trend in the volume of deals during the year ahead, but with a continued absence of the multibillion dollar transformational deals that characterized growth strategies during the super cycle.

The potential exception will be large-scale consolidation across the Chinese domestic producers. Portfolio realignment and structural changes across certain industries, such as steel, coal and aluminium, will be the drivers of deal activities.

The lack of exploration spend as a result of limited access to capital, will inevitably contribute to a future supply deficit and may trigger a return to financing across the juniors towards the end of 2017.

Early signs of market bottom will encourage those who’ve successfully strengthened their balance sheets to start considering strategic acquisitions. Mid-tiers will be consolidating their positions through all-equity based transactions, with a view of becoming major players in their respective commodities at the peak of the next cycle.

Capital raising trends and outlook

Conventional finance dries up as risk aversion grips the industry, but improving pricing environment offers hope.

EY - Capital raised - China share of global

Key findings


the loan value in 2016, the lowest level since 2009, after a second consecutive y-o-y fall of -16%


bond proceeds were issued in 2016 - an increase of 51%


fall in convertible bond volume to 69 transactions, the third consecutive year of decline


decline in value y-o-y means that IPO activity remained negligible with only US$122m raised from 15 listings


the total follow-on equity raised in 2016, a modest 3% increase from 2015 levels

Outlook for 2017

The expected continued consolidation of commodity prices in 2017 will positively impact the sector outlook and strengthen investor confidence. As a result, options for access to capital will improve.

Any increase in issuance of convertible bonds, though probable, is likely to be limited in relative terms when considering the overall funding landscape.

IPOs are expected to pick up in 2017, albeit marginally, reflecting the cautiously optimistic sentiment that continues to grip investors.

The return to growth in 2017 is likely to see a steady rise in transaction volumes as miners resume funding long term capital expenditure projects.

EY - Mergers Acquisitions and capital raising 2016 trends, 2017 outlook

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