Mining for deals: The latest in Materials M&A

The Materials industry plays a critical role in supporting economic growth and development, within the broader Energy, Utilities, Materials and Industrials (EUMI) sector. According to our global M&A EUMI report, it has seen a steady increase in M&A activity recently, primarily driven by growing interest in gold and base metals.

According to data in the Ansarada Deal Platform, in the year to 30 June 2024, the Materials industry enjoyed an uptick in deal activity – climbing 4% over those 12 months.

While this year-on-year increase in activity was only modest, growth relative to the prior corresponding period was materially higher, having lifted 26% compared to the year ended 30 June 2022. This came despite a slowdown in activity during the second quarter of the year that saw deal activity down 25%.

The driving forces

The geopolitical tensions and economic uncertainty have made gold a popular safe haven, driving demand, increasing prices, and making gold mining companies attractive acquisition targets. While base metals silver and copper have also been strong performers, attracting M&A interest.

Deanna Carpenter, Partner at Hamilton Locke said of the landscape, “Geopolitical tensions over in Eastern Europe and Middle East have led some more support for the gold price, and central bank purchases – especially in emerging markets trying to move away from the US dollar, has led to an increase in demand as well.”

“There’s also been some speculation through the first half of the 2024 calendar year that there might be some interest rate cuts in order to address slowing economic growth. That’s all leading towards a really strong gold price,” she adds. 

Lithium is a challenging market

While gold and base metals are strong, our report found that the lithium market has experienced significant volatility in recent years. Overproduction has led to a decline in prices, dampening M&A activity. 

However, the long-term outlook for lithium remains positive, as it is a crucial component of electric vehicle batteries. As the demand for electric vehicles continues to grow, lithium prices are expected to rebound, potentially stimulating M&A activity in the future.

What are the current opportunities in Materials M&A?

• Consolidation: Companies in the Materials sector are actively consolidating to replenish their resources and improve their competitive position.
• ESG focus: Environment, Social, Governance (ESG) considerations are playing an increasingly important role in M&A activity, with companies prioritizing decarbonization efforts.
• IPO activity: While IPO activity has been subdued in recent years, there are indications that it may rebound in 2025-2026. As market conditions improve and companies gain confidence, more will consider going public to raise capital and expand their operations.

A positive outlook for Materials M&A

The Materials sector is poised for growth, driven by increasing demand for metals and minerals. While the lithium market may face challenges, the long-term outlook for the sector remains positive. 

M&A activity will continue to play a significant role in shaping the Materials landscape, as companies seek to consolidate, secure resources, and capitalize on emerging opportunities.

Remember: This is just one piece of the puzzle. Our M&A EUMI Outlook Report explores trends across all four industries. For a more comprehensive view, be sure to download a copy of the report.