The experts within our Chemicals Industry Group maintain ongoing contact with a wide range of knowledgeable sources to stay abreast of the issues and trends that could impact the industry’s M&A climate or otherwise influence our clients’ businesses. Following are a few of the topics addressed in our most recent Chemicals Industry Review, which is published quarterly.
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CHEMICALS REVIEW (2009: Q4) (View complete report)
Thoughts from the Group
In 2009, the chemical industry M&A market suffered along with the rest of the economy. However, private equity firms refocusing on chemical investments coupled with private companies seeking a sale before capital gains tax increases, we expect a rebound of chemical M&A activity in 2010.
2009 M&A Year in Review
2009 proved to be a much more painful year than we expected in terms of deal volume for the chemical industry. Although year-end results have not yet been finalized, we expect the year to ring in at below $40 billion in total M&A dollar volume. A significant portion of the industry’s M&A volume came from Dow Chemical’s acquisition of Rohm & Haas ($19 billion) and subsequent divestitures (OPTIMAL, Morton, etc.). The next large contribution came from BASF’s acquisition of Ciba, which closed at ~$5 billion in enterprise value. The reasons for such significant decline in M&A activity are similar to those that are plaguing other industry sectors:
- General lack of available financing at high leverage multiples
- Underperformance due to economic downturn
- Valuation gap between sellers and buyers caused by difference in future outlook
- “Wait and see” attitude with respect to proving out projections and management expectations
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