The wave of takeovers and mergers in the metals and mining industry looks set to continue in the year ahead, according to a survey of industry executives.
A record year in 2007 for mergers and acquisitions in the metals and mining industry, according to the report by Ernst & Young, saw $210.9bn (£108bn) worth of deals, up from $175.7bn in 2006. This was spread over 903 deals, with an average deal size of $234m.
The biggest transaction was Rio Tinto's takeover of Alcan, the Canadian aluminium producer, for $44bn including debt.
The trend for more and bigger deals would continue, and perhaps accelerate, in the short to medium term, said Ernst & Young. Of the mining and metals executives interviewed for the report, 96 per cent had expanded through M&A in the past 24 months and87 per cent said they thought this would continue.
Michael Lynch-Bell, head of metals and mining transactions, said he expected to see three mining takeover bids worth at least $50bn each in the coming year - not including BHP Billiton (NYSE:BHP) 's hostile bid for Rio Tinto, ENRC's recent move on Kazakhmys and UC Rusal's potential combination with Norilsk Nickel in Russia.
Xstrata, the Anglo-Swiss mining group, is a likely contender to be involved in a big deal, having held talks with Vale of Brazil thisyear. Mr Lynch-Bell said BHP's bid for Rio and Vale's talks with Xstrata had "definitely concentrated people's minds".
Companies also felt it was easier to buy than build new mines, with 40 per cent of respondents saying they would only be able to meet their growth targets by making acquisitions.
At the smaller end of the market, Mr Lynch-Bell said there were many companies listed on Aim in the UK, as well as in Canada and Australia, that were running out of cash. "We expect a sweeping up of these companies," he said.
