Logic for M&A starting to mount

THE mining industry is inundated with predictions from various sources that M&A is ‘about to explode’, usually in similarly sensational language, and almost exclusively from those with a vested interests in promoting a wave of deals – that is, those who stand to pull in serious commissions and fees from M&A such as brokers, bankers and lawyers, or investors looking for exists.

Logic for M&A starting to mount Logic for M&A starting to mount Logic for M&A starting to mount Logic for M&A starting to mount Logic for M&A starting to mount

Image: iStock/Kritchanut

Depending on the point in the cycle, the reasoning why M&A should ‘go through the roof' changes. 
 
At the bottom of the cycle, distressed miners offer exceptional value having had their market capitalisations devastated. As the cycle returns to form, companies with healthy cash flows are implored to act before market euphoria takes over and prices become inflated. This is, roughly where we are today.
 
Once the cycle is in full flight, there is little need for anyone to promote M&A because, a) there is already enough value (read: fees) being created through development funding, and, b) miners have historically been more than happy to spend money on M&A when their coffers are awash with cash, regardles...