CMAI: M&A frenzy to continue, but slower

24 March 1999 20:30  [Source: ICIS news]

HOUSTON (CNI)--There is no end in sight for the frenzy of mergers and acquisitions in the chemical industry, a top consultant said here Wednesday, but the momentum will likely slow despite "perfect" conditions for M&A activity.

Gary Adams, president of Chemical Market Associations Incorporated (CMAI), noted that in just over three years since 1995 there have been nine separate transactions involving sale or assignment of base chemicals businesses by companies with related olefins assets.

In the ten years culminating with 1995, he pointed out, there were only four such ethylene assets transactions.

A return to profitability will certainly slow - but not stop - the momentum of M&A activity in the near term, predicted Adams, who presented his views here at the CMAI-sponsored World Petrochemical Conference. The 14^th annual conference runs through Thursday.

He introduced a new term for the flurry of transactions: "co-opetition," representing the co-operation of companies with their competitors in an effort to cut costs.

With the added pressures of energy market consolidations, noted Adams, base chemical companies have had to intensify their focus on improving long-term cost competitiveness. Non-integrated companies are feeling more pressure to merge, especially those that are "technology poor." He said more firms also are finding less value in full vertical integration and realising, for example, that specialties can perform better alone.

Adams said that without a solid niche, sheer size becomes a "clear advantage in optimising performance," and that expansion of the size of world-scale investments requires more risk-sharing, such as joint ventures.

By: Mary Ann Tawasha
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