In its M&A Insights Report for the first quarter of the year, the firm found that cross border deals are up 13% from US$299 billion from last year’s comparable quarter to US$337 billion, the highest level it has been in 10 years. Analysed by sector, the strongest performers were mining, life sciences, and the consumer sectors. Cross-border mining M&A is up a massive 142% on the year, fuelled by healthy commodity prices, continuing strong demand from China, and the curbing of over-capacity in recent years.
“The current outlook for dealmakers in the mining sector is one of increasing confidence, driven by the continued strengthening of commodity prices. Added to this, there is continuing demand, particularly from China, which is bolstering that confidence and looks set to continue,” said Geoff Simpson, Allen & Overy global head of mining and managing partner for Perth.
“The huge increase in deal values for Q1 may somewhat overstate the level of recovery in the sector. However, many now expect commodity prices to continue firming this year and next and that will encourage banks and investors to get behind new projects and deals, further adding to the improving strength in the sector,” he said.
The report found that the US dominated the first quarter by deal value with 35% of deals connected to the country. Next was Western Europe with 28%, Greater China with 14%, Asia Pacific with 9% and Latin America with 9%.
The top six sectors by value are energy and infrastructure (US$261bn); technology, media, and telecommunications (US$120bn); consumer (US$117bn); life sciences (US$86bn); and financial services (US$80bn).
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Allen & Overy expects a strong year for cross-border mining mergers and acquisitions deals as robust commodity prices are projected to last the whole of 2017.