Article:

Mineral-Rich WA Entices International Investors

13 September 2019

Big Picture

  • Natural resources and supporting services are the primary target sector
  • The majority of M&A activity occurs in the mid-market with targets being revenue-generating mature businesses
  • Lithium and energy sector rapidly growing area of interest with the state government launching ‘Future Battery Industry Strategy’

Mergers & acquisitions (M&A) activity in Australia has experienced its fourth year of growth with deals heavily focused in the mid-market, and the Natural Resources sector dominating the deal count.  Western Australia (WA) is a state rich in minerals including iron-ore, alumina, oil & gas, gold, lithium and other commodities enticing domestic and international investors to the state in search of their next target.

During the last half of FY19, M&A transactions in WA totalled over $5 billion, with many deals taking place in the mid-market.   Industries involved in the state’s most recent transactions include, mining & construction, agribusiness, professional services, retail and technology. Notably, two of WA’s most established stockbroking firms and our most active advisory firm, all have new owners, and the largest deals being that of WA retail giant, Wesfarmers, announcing bids for miners in the renewables and tech spaces.

International investment in Western Australia, historically dominated by China investing in large resources companies, is expected to increase, particularly from North American investors, due to caution being exercised in Asia as a result of the geopolitical tension between China and the US. Investors seeking stability elsewhere in the Asia Pacific region are looking to Australia to expand their investment portfolio, primarily Western Australia, with Natural Resources being the dominant sector.

Looking ahead, due to the global transition away from fossil fuels, Australia is set to invest heavily in renewable energy, as analysts predict growth in electric vehicle sales and energy storage. This transition is expected to drive a strong surge in demand for raw materials in the battery sector, including demand for the mineral, lithium.  WA currently exports 50% of the world’s hard rock lithium concentrate and has five refineries in the pipeline including the Tianqi facility, tipped to be the largest lithium hydroxide plant in the world.

Furthermore, the State Government has declared the battery market an important strategic focus for WA, recently announcing the implementation of the ‘Future Battery Industry Strategy’ and the “Energy Transformation Taskforce” to champion the plan. Additionally, WA is also the third largest producer of cobalt and the fifth largest producer of nickel, chemicals used to build storage batteries, and with a rapidly growing market for electric vehicles, investment activity in Western Australia is not looking to slow down anytime soon.

BDO’s transaction advisory services help evaluate, plan and manage transactions such as acquisitions, mergers, divestments and strategic alliances. An independent opinion is a crucial component of successful transactions. Contact Justin Boyce Cam or Todd Grover to discuss further.