Mining and energy lead Australian mid-market M&A in 2018

Australian mergers & acquisitions (M&A) in the first half of 2018 were propelled by the energy, mining and utilities sectors in the mid-market, which represented 26 per cent of mid-market deals in the period.

Mid-market energy, mining and utilities M&A was also up by 45 per cent from 2017 first half figures.

The mid-market, defined as deals between $10 million–$250 million in value, made up 75 per cent of Australian M&A deals in the period across all industries.

While large cap mining acquisitions tend to dominate headlines — recent examples include OZ Minerals’ acquisition of Avanco ($418 million), South32’s acquisition of Arizona Mining ($1.8 billion) and Ausdrill’s acquisition of Barminco ($271.5 million) — the mid-market is the dominant force in Australian mining M&A overall.

These details, revealed in an M&A report from accounting firm Pitcher Partners and M&A specialist Mergemarket, counted 564 mergers and acquisitions in Australia in the first half of 2018 across all industries for a total of $58 billion overall.

This represented a YoY increase of 13 per cent to the number of deals (up from 497 in first half 2017) and a 19 per cent increase in value (up from $48 billion in first half 2017).

Among mid-market energy, mining and utilities M&A deals, there were 45 in first half 2018, up from 31 deals in first half 2017.

At 26 per cent of mid-market deal value in the period, these sectors were twice as far ahead as the next three sectors, consumer, leisure, and pharma, medical and biotech, which each stood at 13 per cent.

According to Michael Sonego, a corporate finance partner at Pitcher Partners, North American buyers represented a significant boost for Australian M&A activity, particularly in the mid-market.

“We are seeing a lot more North American groups looking at Australia,” he said.

“Particularly in the US where there are more than 2500 private equity groups competing with corporates and family groups for deals and we are seeing many of them direct their focus to Australia because of the sheer competition they are facing domestically and Australia’s global reputation as a safe and stable place to do business.”

The results are in line with other 2018 statistics suggesting a rise in mining mergers throughout 2018.

In May, EY released a report stating that mining M&A grew globally by $US25 billion ($34.6 billion) during the first quarter of 2018 and were up 86 per cent YoY.