The global economic downturn and the fall in the commodities market have created a golden opportunity for wealthy companies to buy others that may be struggling, an Australian mining report from PricewaterhouseCoopers said.
“There will be opportunities for cash rich companies to look beyond the downturn to make strategic acquisitions at bargain prices,” the PricewaterhouseCoopers Aussie Mine report read.
“Locally, this loss of shareholder value has hit many very hard. However, cashed-up foreign investors view the current predicament as a period of great opportunity.”
According to the report, if the cash poor companies do not become the focus of takeover bids they may need to look at joining with others in firmer financial positions in order to avoid an insecure position when the market recovers.
“If they are not to be targets, cash strapped companies will need to consider joint ventures with cashed up local or international players, especially from China and India,” it read.
“Companies will need to be rigorous in their option analysis and risk evaluation.
“Postponement or cancellation can increase costs and leave companies exposed in an upturn.”
The report said that miners need to be aware that other companies will be looking to make transactions and in order to avoid potential problems they need to be prepared to deal.
“Heightened transaction risks arise when there is insufficient time to learn all pertinent facts, a cultural nuance or practice is misinterpreted, or the consequences of a hostile bid are not fully understood,” the report read.
“Being in a position to anticipate deal opportunities or threats from competitors will be critical for any mining company navigating today’s very dynamic global mining market.”