Data from the Ansarada Deal Platform across the Energy, Utilities, Materials and Industrials (EUMI) sector suggests dealmaking activity is now ticking along with the market poised to be a hive of activity in 2025 and beyond.
Ansarada’s Australia and New Zealand M&A Outlook for 2024-25 shows this year could be one of strategic growth, where adaptability and clear strategic vision could unlock the vast potential in the M&A market.
The report cites Partner and M&A lawyer at MinterEllison Kate Koidl who states her firm is ‘cautiously optimistic’ of deal activity heading into 2025.
According to Lion Selection Group (ASX:LSX) CEO Hedley Widdup the M&A clock has already started ticking. When Mining.com.au spoke to Widdup in August the Lion Investment Clock had just been adjusted to place the mining cycle smack bang on the ‘mergers’ phase ticking towards ‘cash takeovers’.
Lion Selection Group’s patented mining clock is central to the firm’s investment strategy. Lion closely monitors the mining cycle via the timepiece and seeks to align investments and exits with mining busts and booms to take best advantage of weak markets to invest and strong markets to sell.
Having ticked past ‘declining exploration’, the clock has struck a time for mergers before Lion flags it ticking towards cash takeovers with a boom on the horizon in a short period of time.
However, as the Lion Investment Clock shows, the market has endured a crash, a spate of liquidations, and declining exploration for the time to be right for M&A.
Ansarada’s data sshows that since the start of this decade, global markets have been in a constant state of flux and dealmakers face challenges on several fronts – a post-pandemic focus on supply chain security, the acceleration of the green energy transition, and heightened geopolitical tensions due to ongoing conflicts in Europe and the Middle East.
The EUMI sector in particular is exposed to such challenges – both directly as producers and distributors of electricity and indirectly via higher risk freight conditions near conflict zones.
According to Ansarada, the M&A data bears that out with EUMI transactions faltering in some jurisdictions since the start of the 2020s. Recent Ansarada Deal Platform data shows deal activity fell across the board during the three months ending 30 June 2024, with an 11% decline in energy activity and a 25% contraction in deals within the materials sector.
However, data suggests the EUMI sector has reached an inflection point.
“Despite the recent softness, both energy and industrials recorded more activity in Q2 than in the prior corresponding period. Meanwhile, in the 12 months to 30 June 2024, utilities and Materials both saw an uptick in activity,” according to Ansarada.
“The economic uncertainty that has been stifling M&A over recent years is either starting to abate, or businesses are becoming more comfortable with the risks it poses and are finding ways to push acquisitions through to meet their long-term goals. Globally, the utilities segment has attracted a lot of attention.”
In the year to 30 June 2024, the materials sector recorded an increase in activity and was surpassed only by energy, which posted a significant increase in Q2 2024 versus Q2 2023 activity. This included triple-figure gains in Australia and New Zealand, the UK and Ireland, and the Middle East and Africa.
Mergers and acquisitions are now ramping up in Canada with gold and copper miner Aura Minerals (TSX:ORA) and gold producer Minera Alamos (TSX-V:MAI) striking deals to acquire fellow Canadian companies.
Aura Minerals struck a deal to acquire Vancouver-based gold explorer Bluestone Resources (TSX-V:BSR) for C$0.50 ($0.55) per share, via a combination of cash and Aura shares. The deal gives Aura control of Bluestone’s Cerro Blanco Gold Project in Guatemala and adjacent Mita Geothermal Project.
Minera Alamos entered into a definitive all-scrip agreement to acquire all of the shares of Toronto-headquartered Sabre Gold Mines (TSX:SGLD).
Widdup recently told this news service mergers and acquisitions activity would be a key trigger for a rise in the valuation of junior gold explorers and developers, which would probably occur around the time interest rates soften, paving the way for “far greater risk appetite in the equity market”.
Tick, tick, boom!
Specialist advisory firm HLB Mann Judd agrees, noting Australia’s M&A market has been subdued (see above graph), having dwindled following the pandemic-induced boom of 2021, which was fuelled by low-interest rates and government stimulus. According to the firm, M&A started ticking along last year but there could be more to come.
In the year ending 30 June 2024, HLB Mann Judd reported an increase in the number of deals exceeding $1 billion, with 26 deals compared to nine in the previous year and 15 in FY2022. The average transaction size of $121 million was up from $89 million in the previous year.
The total number of deals fell by 21%, from 1,190 in FY2023 to 945 in FY2024. The overall average multiple achieved for completed transactions decreased from 10.3x in FY2023 to 9.3x in FY2024. Based on publicly available data, 945 deals were completed in FY2024, a decrease from 1,190 and 1,487 in the two preceding financial years.
“The reduced number of deals across all quarters in FY2024 compared to FY2023 and FY2022 indicates that investors are continuing to take a cautious approach when meeting vendor pricing expectations in light of high interest rates, increased inflation, and ongoing geopolitical tensions,” according to HLB Mann Judd.
“Consequently, some transactions continue to be put on hold as dealmakers prioritise extending their operating cash runway, delaying deals until market conditions improve, and pursuing those transactions that offer clear value add.”
Law reform a deal catalyst?
While dealmakers may be prioritising deals with clear strategic advantages and long-term potential over short-term investments, Lion Selection Group believes the M&A market is at an inflection point.
A potential catalyst for M&A activity in 2025 could be the Australian Government’s merger reforms that recently passed Parliament. Some market watchers believe the reforms will lead to a wave of deals in early 2025 to beat the 1 January 2026 start date.
On 10 October last year the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 was tabled in the Australian Parliament in an effort to overhaul the country’s mergers and acquisition laws. The bill was passed by both houses of Parliament on 28 November.
The new regime was rolled out on 1 January 2025 on a voluntary basis and mandatory notification for parties that meet notification thresholds will come into effect from 1 January 2026.
As per advisory firm Grant Thornton, under the new laws, mergers that meet certain thresholds are required to notify the Australian Competition and Consumer Commission (ACCC). These include mergers with an Australian combined turnover above $200 million, and either a global transaction value of $250 million or where at least two of the businesses have Australian turnover above $50 million. Businesses with Australian turnover more than $500 million acquiring assets or at least two of the businesses having Australian turnover above $10 million are also affected.
The legislation introduced other key changes including, among others, a mandatory notification requirement for parties with deals above certain thresholds of value, turnover or market shares; parties being prohibited from proceeding with a notifiable merger until they receive clearance from the ACCC; and penalties to be introduced for non-compliance with mandatory notifiable mergers.
Other reforms will see increased transparency by the ACCC, clarity around ACCC review timeframes, and empowering the Treasurer to designate certain mergers as ‘high risk,’ enabling the ACCC to review any merger falling under this designation.
While these merger reforms are unlikely to cause abnormally high levels of early 2025 dealmaking, Grant Thornton believes sophisticated players have been factoring the new regime into their M&A thinking.
Law firm Allens agrees, and notes while 2024 was a turbulent year for dealmakers, project developers, and investors in critical minerals in particular, there are reasons for optimism in the coming year.
“New supply outpacing short-term demand growth in immature markets led to declining prices, affecting financing availability and dealmaking activity. Recent large-scale M&A activity shows that, while there may be oversupply of certain critical minerals in today’s market, long-term demand is growing in line with the expansion of clean energy technologies and the global energy transition,” Allens reports.
What does this mean for businesses?
BDO notes changes to Australia’s M&A laws provide much needed transparency and encourage competition; however, the firm says they will have some consequential ramifications for sellers, acquirers, and investors.
“Although the ACCC will now have clear timeframes in which they will endeavour to review deals, the introduction of mandatory notification and the suspensory rule may increase transaction times and costs, adding complexity in an already long process,” BDO says.
“From a seller’s perspective, the changes will need to be considered fully at the outset of a transaction process ensuring there is a focus on potential acquirers that have a strong track record with the ACCC and do not represent significant completion risk.
“From an acquirer / investor’s perspective, the changes have the potential to alter the strategy for acquisitions. Those that get on the front foot and can display a strong relationship and ability to transact will position themselves at the top of the list for competitive processes.”
“From an acquirer / investor’s perspective, the changes have the potential to alter the strategy for acquisitions”
Advisory firm Herbert Smith Freehills suggests in addition to the legislative changes, the ongoing assessment of the asset portfolios of a number of ASX-listed companies will help drive 2025 M&A volumes.
The firm believes many companies will continue contemplating their strategies and consider the need to simplify or to grow and 2025 will be the year to execute on those plans.
“Private capital / private equity players remain ready, willing and able to jump in and snap-up unwanted quality asset portfolios (particularly those with strong cash flows),” Herbert Smith Freehills says.
“But the ongoing energy transition and the thirst for tech, especially from foreign buyers, will see those two sectors being very active. Financial services has also been a bit of a sleeper, but we think that various drivers (such as portfolio refinement, acquiring adjacent skills and adapting to regulatory change) could see that sector with a very respectable scorecard …”
In 2024 private capital (and private M&A) took centre stage and there were a decent number of meaningful listed deals, as well as the occasional hostile takeover. This year, Herbert Smith Freehills forecasts on the demand side, “hungry corporates and the ubiquitous mountains of private equity and private capital dry powder (including increasingly active super funds on the scene) will drive things”.
“The need to exit from assets and – both for corporates and PE – will help on the supply side,” the firm says, acknowledging the political uncertainties including the precise approach of the new US Administration and an Australian federal election in the first half of the year.
Time to reflect
M&A activity began heating up in H2 2024. Acta Investment Group’s lawyers Hall & Wilcox in January this year issued a notice to the Australian Securities Exchange (ASX) declaring all remaining defeating conditions have been lifted regarding its off-market proportional takeover of Helix Resources (ASX:HLX). Acta now has a 19.7696% shareholding in Helix.
On 30 December 2024, Astral Resources (ASX:AAR) acquired a 19.99% shareholding in Maximus Resources (ASX:MXR) with the suitor yesterday (6 February) dispatching the bidder’s statement for its off-market takeover bid.
Also late last year, Greenvale Energy (ASX:GRV) and Aurum Resources (ASX:AUE) were the latest mining companies to join the M&A party, today (16 October) announcing acquisitions in their respective markets.
In October, Greenvale Energy (ASX:GRV) and Aurum Resources (ASX:AUE) announced acquisitions in their respective markets. Aurum’s takeover offer for Mako Gold (ASX:MKG) closed on 31 January 2025. The company now has a 91.38% shareholding in Mako.
Greenvale is expanding its Australian energy portfolio and has entered into an agreement with privately held Gempart (NT) to acquire a sandstone-hosted uranium project in the eastern Arunta region of the Northern Territory. The company has secured the rights to obtain an immediate 80% interest in two tenements being free-carried through to a Definitive Feasibility Study (DFS).
Paladin (ASX:PDN), Fission Uranium (TSX:FCU), Terra Uranium (ASX:T92), Rio Tinto (ASX:RIO), Arcadium Lithium (NYSE:ALTM), were notable companies involved in uranium-related deals.
Amid this M&A activity, deals regarding recapitalisations and restructurings in the mining space also started ticking along.
As Mining.com.au reported in December 2024, there had been a spate of recapitalisations among mining companies with a growing number of juniors in financial distress despite record high prices in some commodities.
Firms such as FTI Consulting and KordaMentha in particular have been increasingly busy and appointed administrators and receivers as junior explorers in financial distress seeking to recover value on behalf of stakeholders.
Surging costs, challenging market conditions, and investor activism placing pressure on company boards to improve operational and financial inefficiencies have created a perfect storm in which restructuring and recapitalisations are sought after to stabilise their businesses in a trend not seen in years.
Distressed situations involve directors, lenders, shareholders, employees, and other creditors working together to protect and recover value in a company and ultimately provide direction in times of crisis.
In December, Aureka (ASX:AKA), which is formerly known as Navarre Minerals, officially finalised its new identity after undergoing a raft of changes, including appointing a new management team, recapitalisation, and resuming trading on the ASX.
Since the company’s shares were suspended in June 2023, Aureka has re-emerged debt-free with a reorganised capital structure and no outstanding convertible debt.
Group 6 Metals (ASX:G6M) on 4 December collapsed under the weight of its debt and ailing finances and began seeking to recapitalise in a plan involving the conversion of Group 6’s debt and other creditor liabilities into shares.
As part of that plan, a board and executive management team restructuring was to take place, with Chairman Johann Jacobs retiring and CEO Keith McKnight departing, among other changes. Moelis Australia in September was appointed to conduct a strategic review to determine the optimal capital structure and consider M&A opportunities to reposition Group 6 and grow its valuation.
That same month, KordaMentha’s restructuring division was appointed as joint and several voluntary administrators of vertically integrated lithium developer Lepidico (ASX:LPD) following unsuccessful attempts to secure financing for the Karibib Lithium Project and mineral concentrator.
Time and again
Navarre Minerals in November 2024 resumed trade on the ASX after and completed a recapitalisation when it raised $6 million after a protracted trading halt.
On 21 June 2023, McGrath Nichol were appointed receivers and managers of Navarre Minerals. The appointment of receivers and managers was made by secured creditor, Evolution Mining.
The Navarre Group, excluding Navarre Minerals Queensland (in liquidation), entered a Deed of Company Arrangement (DOCA) in late 2023. The DOCA agreement provided the framework for Navarre to recapitalise and return to its heritage as a Victorian gold explorer, focusing not only on its flagship Stawell Corridor Projects but also the St Arnaud Project, Tandarra Gold Project JV, Jubilee Project and other tenements.
In October of 2024, voluntary administrators KordaMentha ran a dual-track process for True North Copper (ASX:TNC), which led to the Queensland-focused company to undertake an equity recapitalisation and reinstatement on the ASX on 14 January.
As part of the recapitalisation process True North raised $50.9 million in equity via a placement and $2.54 million as part of a share purchase plan. The recapitalisation enabled True North to extinguish all lender debt with Nebari Natural Resources Credit Fund II and provided funding for a revised exploration and resource definition drilling strategy.
The appointment of KordaMentha had been perplexing to many as True North at the time had been on track to become Australia’s next copper producer and critical metals supplier by Q1 2025 with the start of sulphide processing scheduled in the new year.
Meanwhile, Zeta Resources was removed from the official list of the ASX on 17 October following completion of the compulsory acquisition by UIL — the major shareholder of the company.
And shares in Calidus Resources (ASX:CAI) were suspended from the ASX in July 2024 when Macquarie Bank — Calidus’ largest shareholder — shut down operations. KordaMentha was appointed as receiver with FTI Consulting voluntary administrators.
The embattled gold miner in September appointed administrators despite having assets worth some $1.3 billion at the end of June 2023. In July, a deal was cut for mining magnate Mark Creasy to purchase $149 million worth of debt owed by Calidus to Macquarie through a loan and hedging facility.
Write to Adam Orlando at Mining.com.au
Images: Aureka, HLB Mann Judd, Lion Selection Group & Stock
