Noted: Resources M&A to pick up, Deloitte says

November 4, 2009

Deloitte’s Energy and Resources group says M&A in these sectors could return to “pre-recession levels” by 2011. In particular, it says the rise of big state-backed rivals is putting pressure on large mining groups, in much the same way Big Oil came under pressure a decade ago. From the group’s 2010 predictions report:

“During 2009, mining M&A has been led by the junior or mid-level players, which have to consolidate if they want to stay alive and not be swallowed up by the bigger firms. Indeed, many anticipate that the mining sector will continue to consolidate until there are a handful of supermajor firms like there are in oil & gas.

“Large mining companies will increasingly need to buy rivals and subsequently sell off assets to gain synergies if they are to compete with state-owned companies, particularly those from China.

“These conditions mirror those encountered by large oil companies a decade ago, when massive consolidation swept the industry in response to the rise of national oil companies (NOCs) such as Saudi Aramco, Gazprom,Petrobras, and others.”

But what are the deals? Anglo-Xstrata is off (for now), as is BHP-Rio. Maybe it’s just a matter of time. Anyhow, in oil and power the team say:

“Apart from the oil supermajors, consolidation will be likely across sectors. Oil & gas independents will be possible targets for reserve-hungry majors but also potential beneficiaries of portfolio rationalization among larger players.

“Power and utility companies will likely look at M&A activity to bolster their strategic positions, provide access to markets, and to raise cash for capital improvements.”

Get the full report here.

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