Firm predicts resources M&A uptick

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Australia is likely to see an uptick in resource sector deals this year according to M&A partners at Minter Ellison.

Partner Ron Forster said private equity companies and large strategic buyers are looking for opportunities in distressed sales.

“Some of the companies are finding their balance sheets are under pressure and are being forced into asset sales,” Forster told Australasian Lawyer.

“That's one of the drivers to increased M&A activity in the sector.  While this is a general trend across the sector, it's the smaller cap oil and gas companies that are most vulnerable.”

Companies with balance sheets under pressure still need financing even if the asset isn’t currently producing anything, Forster said, providing an opportunity for lawyers.

“We're seeing more companies trying to fundamentally restructure their businesses,” he said.

“These are opportunities for lawyers to work with their clients to help them over the hump.”

In many cases, efforts to reduce costs have been passed onto the services sector which has seen heavy knock-on effects.

“Some companies took on too much debt during the mining boom and it's now clear that reducing the business's cost base is no longer enough,” said Minter Ellison partner Michael Hughes.

“What we're seeing are more companies trying to fundamentally restructure their businesses, with or without formal processes.”

Forster predicts the trend will continue for the remainder of 2016 and possibly into the 2017.