Canadian mining and metals deal value down 43% as focus on business
fundamentals rises: Ernst & Young
Macroeconomic issues put damper on M&A, but confidence on the rise
VANCOUVER, Nov. 28, 2012 /CNW/ - Global mining and metals deal value and
volume are down globally, with Canadian numbers falling 43% and 16% year over
year in the first nine months of 2012, according to Ernst & Young's seventh
twice-yearly Global Capital Confidence Barometer.
"Our survey results reveal that only 38% of companies, down from 53% in April,
are focused on growth in the next 12 months, while 27% are refocusing on
business fundamentals, including cost reduction and operational efficiency,"
says Bruce Sprague, Ernst & Young's Canadian mining and metals leader.
Cost inflation, slowing economic growth, heightened geopolitical risk and
volatile prices have sparked this shift in mining and metals companies'
"Executives are trading in their 'growth for growth's sake' mentality and
refocusing on capital optimization," says Sprague. "Nearly a third of our
survey respondents cited cost reduction and operational efficiencies as key
priorities in the next year."
But confidence in doing deals is improving, with 28% of respondents expecting
to pursue an acquisition in the next 12 months. That's up from 18% in April.
"While the value and volume of transactions is down, mining and metals
companies' confidence in the current M&A environment is on the rise," says
Sprague. "Expect to see companies move away from diversification and toward
synergistic deals that create economies of scale and take advantage of low
valuations across the sector."
Smaller deals and strategic partnerships are on the boardroom agenda as
companies manage pressure to generate returns on investment, especially in
light of recent cost overruns and integration issues.
"While many companies are refocusing on efficiency and cost control, risk
management and capital allocation, new transaction opportunities exist for
those with strong balance sheets — opportunities few can afford to miss out
on in an era of intense global competition for resources," says Sprague.
About the survey
Ernst & Young's Global Capital Confidence Barometer is a survey of more than
1,500 senior executives from large companies around the world and across
industry sectors. The Barometer's objectives are to gauge corporate confidence
in the economic outlook, understand boardroom priorities over the next 12
months, and identify the emerging capital practices that will distinguish
companies that build competitive advantage as the global economy continues to
evolve. This is the seventh twice-yearly Barometer in the series, which began
in November 2009.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory
services. Worldwide, our 167,000 people are united by our shared values and an
unwavering commitment to quality. We make a difference by helping our people,
our clients and our wider communities achieve their potential.
For more information, please visit ey.com/ca.
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-0- Nov/28/2012 14:30 GMT
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