MERGERS AND ACQUISITIONS
Low risk M&A
This type of deal focuses on consolidation for synergies and pooled resources, in response to cost inflation and fund raising difficulties. Quite often, low risk M&A transactions are pursued to achieve synergies in shared facilities, infrastructure, blasting etc.
Such deals focus on more than just the transaction. The myriad of state-owned and sovereign wealth investors looking to acquire assets in return for security of supply via offtake are such examples. Strategic M&A deals provide much needed capital to the target entity in a capital-constrained market, with larger companies acquiring “toehold” stakes in prospective junior explorers. Such deals enable acquirers to take advantage of equity devaluation in the junior segment to secure future growth options.
Minority stake acquisitions
Another emerging trend is the increase in the number of deals done for minority stakes rather than full-takeovers. Consequently, these minority stake acquisitions increase options for juniors, be it exit through an outright sale, or funding via a strategic investment that lends confidence to a project and enables future financing to be arranged.