Financial investors and equity-backed alternative capital providers will be particularly active in the M&A market in the first half of 2014, driven by anticipated longer term commodity price recovery and the ability to leverage management ability, as reported by , the EY report Mergers, acquisitions and capital raising in mining and metals: 2013 trends, 2014 outlook.
“A number of Private Equity funds have raised resources focused funds and we expect increased deployment of these funds into resources assets in 2014. We estimate these investors have more than US$10b deal capacity for the sector, thus we expect to see some big deals in the sector over the next year,” says Sandile Hlophe, Head of Transaction Advisory Services for EY Africa.
“They will be focused on low risk geographies and looking to leverage under-performing assets, using technical, operational and financial influence to generate better returns.”
This increased appetite follows a year in which financial investors’ share of total deal value in the sector increased from 5% in 2012 to 19% in 2013. In Africa, opportunity for capital investment lies with the juniors, particularly from financial investors.
“This supports the view that 2013 marks the tipping point for the sector, with many of the providers of such capital calling the bottom of the market,” adds Hlophe.