Gold Industry M&A Expected to Pick Up While Other Industries Plummet

The quietness in the gold industry with regards to M&A is expected to change as more and more countries open up their economies.

With countries being on lockdown these past few months, it has prevented potential acquirers from traveling to inspect acquisition targets.

Miners year-to-date have struck 275 transactions worth about $6.9 billion, including net debt, according to data from Refinitiv, down from 329 deals valued around $26.8 billion in the six months to June 2019.

Even though M&A in the gold industry has been quiet when compared to the prior year, M&A has collapsed across the board. Both U.S. and global markets experienced a steep decline in merger and acquisition (M&A) announcements in the first quarter of this year.

Globally, the number of transactions announced in Q1 was down 13.8 percent, and the total value of those transactions was down 37.6 percent, compared with Q1/2019. This follows a four-year trend of steady year-over-year growth in M&A transaction volumes. The dropoff in the United States was even more stark: a 14.7 percent decline in the number of transactions announced and a 53.7 percent drop in total value.

Only two transactions in the United States last quarter were worth more than $10 billion, versus an average of six per quarter throughout 2019.

The reason why we believe gold M&A will pick up for the remainder of 2020 is due to the fact that gold is at or is near all-time highs in all fiat currencies. The major gold miners are looking to replace reserves, as many studies have indicated we are at “peak gold.”

Also, while many companies throughout different industries are reporting a complete collapse in their top and bottom lines, the gold producers are booming—many recorded extreme growth in cash flow, which has led to many companies to increase their dividends.