Rocking the mining sector – time for buyers to be a little boulder?

21.11.2018

Over the last 12 months, an increasing number of mining services companies have approached us wondering where we are in the cycle, and when the right time is to start looking for a partner / exit. After riding the highs and lows of the last boom, owners are either exhausted and keen to get off the rollercoaster, or have weathered the storm and want to position early for the next uptick.

 

 

 

 

 

 

 

 

Looking at the stats, the “recovery” is far from conclusive. Commodity prices staged something of a comeback in 2018, but the outlook for the next 2 years is flat at best. Investment in mining operations seems to have stabilized, but again the outlook is “cautiously optimistic”. However, according to the below ABS / BIS data, the real opportunity is in operating and maintaining the investment already made at the height of the boom.

Investors seem to be cottoning on to this. Over the last 18 months there have been a number of transactions in the mining services sector, as detailed in the table below. Most of these provide people, equipment, or maintenance services to mine owners as they ramp up production.

So, what advice can we give owners who are considering a transaction in the next few years?

  • Read the signs. The charts are far from conclusive, but anecdotal evidence is positive. Lead times are pushing out for equipment purchases, people are getting harder to find, and transactions are starting to happen. If prior experience is anything to go by, when the momentum shifts it will happen quickly;
  • Prepare early. If some one knocks on your door, are you ready? Do you know what your criteria are for engaging with a potential buyer? Are you preparing information in a way that would make your key selling points clear to a buyer? Would your information stack up in due diligence? First impressions count, and you may only get one chance;
  • Tailor your message. It’s important to not just tell your story, but also consider why you might be attractive to particular buyers. How can you help a buyer take advantage of increased sector activity? What do you offer that they can’t build organically – access to particular customers or projects, skillsets, or a team of people that’s hard to replicate? What does your balance sheet look like – if you’ve got low debt, can this help the buyer improve their own leverage ratios?
  • Succession planning. You need to have an answer for why you are trying to exit, and what the business looks like without you. Who has the relationships with customers and suppliers? Is there a management team? What are the growth opportunities for the next owner?

Of course, if you need some help framing this story, you know where to come! InterFinancial has a long history working with mining services businesses, and we are in regular contact with investors in the sector. If you would like to discuss your growth or succession options, please contact Brad Shaw or Mark Steinhardt on 07 3218 9100.

17.4.2019

Sector Dashboards April 2019

Our monthly dashboards cover seven key sectors of focus, with each sector built up by several subsectors that cover similar companies based on; products, end markets, services, assets classes or other characteristics. The publications include all companies listed on the Australian Stock Exchange that are actively traded and covered by research analysts, and hence have […]

Read more
17.4.2019

Two sides of the same coin – A guide to Due Diligence

A clean exit and a high multiple. That’s all sellers are after, right? The answer is of course, no. Cultural and strategic fit, growth capital, opportunity to diversify, development for key talent, legacy preservation and brand retention are just a few of the many considerations business owners have when selling their business. But how do […]

Read more
10.4.2019

Clairfield’s Annual Outlook 2019 examines leading themes in Business & Finance

Clairfield International is pleased to announce the publication of its Annual Outlook 2019. This yearly publication is a look at the M&A landscape by sector and region with a special focus where Clairfield is most active. The 2019 edition features the contributions of senior advisors and experts in the field for thought leadership pieces and sector […]

Read more
19.3.2019

Sector Dashboards March 2019

Our monthly dashboards cover seven key sectors of focus, with each sector built up by several subsectors that cover similar companies based on; products, end markets, services, assets classes or other characteristics. The publications include all companies listed on the Australian Stock Exchange that are actively traded and covered by research analysts, and hence have […]

Read more
18.3.2019

20 Questions – M&A Edition

In this month’s dashboard, we play 20 questions. But no, we are not playing parlour games in Victorian England, we are talking mergers and acquisitions. A sale process can take 6 to 9 months to complete, so choosing the right advisor for your needs should not be taken lightly. Here are 20 essential questions you […]

Read more
14.3.2019

Blockchain and smart-contract technology could revolutionise the M&A process

Technology solutions can reduce costs, simplify, and accelerate the M&A process from target screening and due diligence to contract drafting and integration. Blockchain and smart contracts are two new tools that could revolutionize the M&A process particularly for small and medium enterprises. Read more in our latest technology sector snapshot.

Read more
05.3.2019

Speakers wow at Clairfield’s Technology & Healthcare conference in Jerusalem

Clairfield dealmakers from 10 different countries were impressed by the scope of private and government investment in technology at Clairfield International’s TMT and healthcare conference in Jerusalem last week. The message was clear from an impressive array of local experts: Israelis are natural risktakers, which translates into an entrepreneurial culture that values making a better […]

Read more
20.2.2019

Private Equity – Looking for Fine Answers

Private equity firms (and other financial investors) have always had an air of mystery about them, particularly for business owners who haven’t raised capital before. With press coverage usually biased to bad news stories, many owners assume the worst when considering financial investors as an option to exit or grow their business. As mentioned recently […]

Read more
20.2.2019

Sector Dashboards February 2019

Our monthly dashboards cover seven key sectors of focus, with each sector built up by several subsectors that cover similar companies based on; products, end markets, services, assets classes or other characteristics. The publications include all companies listed on the Australian Stock Exchange that are actively traded and covered by research analysts, and hence have […]

Read more