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MInInG seRVIces

accretion, according to both Boyce Cam
and Grover.
“A lot of businesses didn’t make it Major scoops up
through that last downturn but the ones
who were left were the strong operators.
That adds credibility in the current mar-
ket,” Boyce Cam said. McKay
Credibility is at the heart of the value
proposition in the highly competitive
world of mining services.
“Equipment is expensive but that is not ajor Drilling Group International Inc founder of McKay Drilling, said he was
what you are paying for; you are paying Mhas returned to Australia for the first looking forward to seeing the McKay
for the brand, the relationships and the time in seven years after acquiring Perth team grow together with Major.
work pipeline,” Grover said. drilling outfit McKay Drilling in July. “Major Drilling is a great fit for McKay
“Those companies who are a trusted Major paid $80 million for McKay, in terms of capabilities, values and cul-
provider to Rio Tinto Ltd, BHP Ltd or which boasts one of the newest fleets ture,” he said.
Fortescue Metals Group Ltd can be in the Australian sector and has a work- The McKay purchase adds 20 innova-
worth a lot because it is difficult to dis- book full of Tier 1 jobs. tive, late-model rigs to the Major fleet,
place the incumbent in those contracts.” “We always hoped for a return to Aus- now totalling well over 600 drills. The ad-
The BDO M&A team speak from re- tralia when the times and conditions dition of more than 200 McKay employ-
cent experience. This year the company were right,” J.R. Davies, Major Drilling ees increases Major’s global workforce
worked on the sale of WA-based Mc- Australasia vice-president, said. “Now, to more than 3,300.
Kay Drilling to TSX-listed Major Drilling with McKay’s expertise in specialised “I have known about McKay for many
Group International Inc in an $80 million drilling, especially RC drilling, their years and have always considered them
deal and the $114 million acquisition of high-end equipment and innovation in to offer the best rigs, equipment, innova-
transportation company Go West Tours the industry will be a great asset moving tion and service to the drilling industry
to ASX-listed SeaLink Travel Group Ltd. forward.” in Western Australia,” Davies said.
Boyce Cam said Go West and Mc- Mark McKay, managing director and
Kay were examples of local businesses
which had built up enviable reputations
with WA’s Tier 1 miners. lot of time supporting our clients through chest.”
“They both had a strong pipeline of that process of preparing themselves for Regardless of the route taken, Boyce
work with the majors,” he said. “McKay takeover.” Cam and Grover see the blue skies for
is a leader in Australian drilling and has Boyce Cam agreed, saying it was a mining services stretching out well be-
long-term relationships with Tier 1 clients matter of presentation. yond 2021.
which translates into a healthy pipeline of “We help companies better articu- “We expect the outlook to continue for
work which for Major Drilling makes the late their business and their strategy by the next 12-18 months at least,” Boyce
acquisition a safer bet than normal.” working with them on forecasting, etc. to Cam said.
Grover said the Go West deal came present their business in the best pos- “Based on the contracts already out in
about almost immediately after the com- sible light,” he said. “It can be a big jump the public domain, I can’t see how things
pany signed a new contract to provide for the vendor and it is often quite hard will slow down in the next 18 months,”
bus services to BHP. for the acquirer to understand the oppor- Grover said.
“SeaLink is a $2 billion company oper- tunity in front of them. The one impediment to success will be
ating the Rottnest ferry service, Captain “By working on revenue forecasts and availability of both labour and equipment.
Cook Tours and half of the Transperth other aspects, we can corporatise the “That is the fear public markets have
bus fleet but it had never been exposed message.” about listed mining services compa-
to mining,” he said. “Go West had a great The adjustment required in reporting nies; their ability to support the contracts
reputation and brand in the mining sector for listed companies often makes trade they’ve won,” Boyce Cam said.
and it was an earnings accretive transac- sales more desirable than the IPO pro- For those smaller companies who are
tion. So, SeaLink pays multiples of the cess, according to Grover and Boyce applying technical innovation, the short-
historical value and there is still good Cam. age of people and kit could be beneficial.
uplift for it. “If a private vendor does a corporate “We believe there is a particular mar-
“A vendor can only sell if they leave M&A deal, they get the cash on Day 1, ket for differentiated mining services
something on the table for the next com- but the IPO process will include periods companies, if you are just yellow kit pro-
pany and that is happening at the mo- of escrow, reporting requirements, for vider it could be tough but if you offer
ment, particularly with all the blue sky for some time afterwards,” Boyce Cam said. something different, there will be corpo-
the sector.” “Plus, any company with a market cap rate interest,” Grover said.
For Grover, articulating that value less than $150 million is going to strug- Boyce Cam agreed, saying safety and
proposition is key if smaller businesses gle to get institutional support.” efficiency were key drivers.
are to be successful in the M&A space. “And, the reporting requirements are “It is a combination of safety and ef-
“These are usually family businesses greater,” Grover added. “As a publicly ficiency which creates demand,” he said.
who are very good operators and very listed company you must report every- “But, that has to be in the DNA of the
good with their money but are perhaps thing which can be a difficult adjustment business.”
a bit light on from a corporate govern- for smaller companies who are used
ance perspective,” he said. “We spend a to keeping their numbers close to their – Dominic Piper

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