Deal inertia rife in mining

Widespread deal inertia and a gap between seller and buyer price expectations are contributing to the further decline in mining deal volumes and values over the third quarter.

According to financial research and advisory firm EY the gap between buyer and seller price is “seemingly unbridgeable” as year on year deal values fell 22 per cent when excluding the GlencoreXstrata deal.

“Only one mega deal closed during 3Q 2013, compared with 12 over the first half,” EY said.

“Most of the industry remains cautious and introspective, while the many non-core divestments that have been announced have yet to close.”

The number of deals is also lower with only 537 recorded to date this year.

At the close of quarter three last year, the EY research shows 706 deals were listed.

“Equity markets remain challenging, with junior follow on proceeds and IPO volumes remaining at historic lows,” EY said.

The firm said gold continues to be the single most targeted commodity by volume, with 55 deals finalised in the September quarter, 25 per cent of which were by financial investors.

By region the first nine months of 2013 saw North America top the table by value of deals closing $21.1 billion worth.

Asia-Pacific came in second by deal volume closing $15.6 billion over the same period.

“In the current environment, many companies are inward-focused and transacting for synergies, rather than pursuing outbound growth,” EY said.

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