HLB Mann Judd Sydney’s quarterly review of mergers and acquisitions has found that the average deal size during the March quarter reached $118 million, up from $49 million a year earlier on the back of strong activity in the mining sector.
The firm noted the increase in average deal value came despite a decline in the number of transactions, from 331 in the third quarter of the 2021 financial year to 217 a year later.
“The commodities boom is ultimately driving the interest and activity in M&A. Gold, copper and lithium miners in particular are benefitting from the economic conditions, and we believe there will be further opportunities to come for many in gold and precious metals,” commented HLB Mann Judd Sydney corporate advisory partner Simon James.
“The macro-environment has really played into the hands of local miners and allowed them the ability to add value by considering consolidation. Some parts of the materials market have been ripe for consolidation for some time, and while debt has remained cheap, many have been able to capitalise and acquire smaller companies.”
The report indicated that the growth in overall deal value was largely linked to the substantial increase in average deal size for transactions over $100 million, which reached $424 million in Q3 FY22 compared to $243 million in Q3 FY21.
Deals completed during the period included Rio Tinto’s acquisition of the Rincon lithium project in Argentina from Sentient Equity Partners, and Evolution Mining’s $1 billion acquisition of copper-gold mine Ernest Henry in Queensland.
Materials was the top sector by quantity of deals during the quarter, followed by consumer discretionary and information technology, while the energy and utilities sectors were the leaders by deal value.
HLB Mann Judd also highlighted consumer discretionary as the top sector by share of deals at the SME end of the market that includes companies with an annual turnover of less than $50 million.
“While inflationary pressures and the almost-certain rate rises may lead to some businesses momentarily pause, it’s encouraging that all sectors are continuing to look to M&A for growth,” Mr James said.
“The market over the past 12 months has been really strong, and we’re expecting that to continue, at least over the coming 6 to 12 months.”
