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.

21.8.2019

Merger to create infinite value

Australian international aid and development not-for-profit organisation, Cufa Limited, has merged with the Foresters Group, a not-for-profit micro-loan organisation providing emergency finance at a competitive rate for low-income households as a more affordable alternative to high-cost payday lenders. InterFinancial acted as adviser to Foresters Group in the merger.  Cufa, established in 1971 has been providing […]

Read more
21.8.2019

Sector Dashboards August 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
20.8.2019

Time After Time

One of the most frequent questions we get asked by clients is “how long does a transaction take?”. Of course, the standard advisor answer is “it depends”, but exactly what does it depend on, and how many of these factors are within the control of the client or the advisor? Preparation. A key determinant of […]

Read more
23.7.2019

Follow David Hassum’s journey

Our very own, David Hassum has begun his 1800 km bicycle journey across the Great Divide Mountain Bike Route from Banff, Alberta to Jackson Hole, Wyoming to raise money for breast cancer research in memory of his partner Vee. The route is almost entirely dirt-road and mountain-pass riding, with riders encountering wild rivers, remote mountain […]

Read more
18.7.2019

Sector Dashboards July 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
10.7.2019

Top ranking in industrial and regional midmarket league tables

From manufacturing precision sensors to forging manhole covers, industrial companies are a vital base for Clairfield International. Clairfield’s industrial team, led by Chris Gregory and Dirk Freiland, is recognized as a top advisor for midmarket industrial deals. Refinitiv ranks Clairfield International as number 6 in industrial deals and number 13 in consumer materials. The Refinitiv ranking […]

Read more
05.7.2019

InterFinancial continues to power ERM

InterFinancial has advised energy retailer and energy solutions provider ERM Power on its 50% acquisition of industrial automation and electrical engineering company, Alliance Automation.  Alliance Automation is one of the largest independent electrical engineering and automation solution providers in Australia, with a team of more than 190 people and offices in Queensland, New South Wales, […]

Read more
25.6.2019

Snapshot – Security Software: Increased spending in a highly fragmented sector

GDPR requirements and high-profile hacks are driving significant cybersecurity spending. Security software is highly fragmented and larger companies are seeking to offer all-inclusive solutions, via acquisitions. 70% of M&A exits in cybersecurity are below USD 100 million, showing a robust midmarket in this segment. Read the report here: Security Software Snapshot. Joseph Sabet leads the security […]

Read more
24.6.2019

Sector Dashboards June 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
20.6.2019

Traps in post-merger integration

So, you have found a growth partner, survived the due diligence process, closed the transaction and held the celebration dinner. Congratulations!! You are now at day 1 of the rest of your business’ future. All the promises made are now long in the rear-view mirror and the day to day running of the merged business […]

Read more