The global mining industry has experienced exceptional growth over the past two years. The rise in commodity prices has largely accounted for this growth, driven by increased demand from China and the weaker US dollar. In order to meet global demand for ore bodies and obtain access to new technologies and competencies, mining companies are creating new ventures, investing in consortiums, acquiring competitors, and disposing or acquiring specific assets.
Merger activities concentrate ownership, which can lead to better-informed decisions on development and expansion opportunities. In addition, larger companies would be better placed to manage the supply-demand cycle in a sustainable manner, thereby avoiding the ,“boom-and-bust” cycles of the past. It is likely that industry consolidation — both hostile and friendly — will continue, resulting in further concentration of mineral ownership.
Responding quickly to deal opportunities, bridging language, legal and cultural gaps, and building the most realistic business case for a transaction decision can be challenging. At the same time, heightened transaction risks arise when there is insufficient time to learn all pertinent facts, a cultural nuance or practice is misinterpreted, or the consequences of a hostile bid are not fully understood. So, when doing a transaction, it is invaluable to have a trusted advisor – one that’s experienced in structuring deals, knows how to manage risks, and has resources on the ground where the deal is unfolding.
How PwC can help you
PwC is well positioned to be that advisor. On the buy side, we help acquirers evaluate targets, improve their M&A process and set post-close priorities. After a deal closes, we counsel a company on improving the internal controls governing a target's financial, IT, back office, supply chain and customer management systems and processes. On the sell side, we help clients identify and resolve carve-out issues, assess the quality of earnings, determine the impact of transition/removal issues, assist in the coordination and structure of the data room, and advise on the purchase agreement.
Our structuring specialists help ensure that the financial structures employed in a transaction comply with applicable financial accounting standards. We also help clients understand the impact of income tax, the financial markets, corporate governance structures, rating agencies, and regulatory concerns on the proposed treatment of a transaction.
For a potential acquirer (in advance of a bid) our transaction specialists prepare reviews on the bidder's own business and analysis of the vulnerability of the target including identifying possible “white knights.”
For potential targets, as part of their defence, we identify areas of strategic, operational and financial vulnerability. We also perform “dummy” assignments for companies that are exposed to a potential take-over bid.
