TORONTO – Despite a 51% decline in the value of deals in the first quarter of 2014, the optimists at EY point to the modest improvement over Q4 2013.
"Deal value may have fallen 51%, and volume 13%, in Q1 over 2013, but we've already seen increased desire to do deals in Canada," said Bruce Sprague, EY's Canadian mining and metals leader. "Transaction activity will come down to whether companies with an eye on M&A can find the right opportunity."
He went on to say that cost management remains at the top of the industry's priority list. Mergers will happen, but these will involve lower risk deals to strengthen a company's position rather than transform it.
The EY study also indicated that executives are confident that what appeared to be a seemingly unbridgeable buyer-seller valuation gap is now closing. About 45% of respondents believe the valuation gap to be less than 10%, up from 21% six months ago, and 80% expect it to remain at this level or decrease in the next six months.
Sprague's final comment: "We expect deal volumes to build slowly through the rest of 2014 and into 2015. Portfolio optimization among larger miners, financial buyers, and consolidation among juniors and mid-tier companies will drive deals. It's going to be an interesting year."
Click here to download EY's Capital Confidence Barometer report.