Bankers predict strong year for M&A

08 February 2006 20:40  [Source: ICIS news]

NEW YORK (ICIS news)--Investment bankers on Wednesday predicted a strong year for chemical mergers and acquisitions (M&A) in 2006, citing a full pipeline of assets for sale and healthy demand from strategic and financial buyers.

In 2005, the global chemical industry completed $33bn (Euro28bn) in transactions - up from $31bn in 2004, said Peter Young, president of New York-based investment bank Young & Partners. However, the number of deals over $25m in size fell from a record 85 in 2004 to a still-strong 73 in 2005.

“2006 will be a strong year for chemical M&As with dollar volume exceeding 2005 levels and the number of deals at least equal to last year’s, driven by higher activity in commodities,” said Young. “However, valuations should not go up dramatically as there is more than enough supply to meet the strong demand.”

“I predict a very active 2006,” said Ulrich Geldmacher, global head of chemicals at Deutsche Bank Securities. “The high level of activity is being driven by strategic buyers like BASF coming back, and financial sponsors being both buyers and sellers as financing continues to be very available.”

The pickup in deal activity may be indicative of the beginning of the end of the M&A cycle, said Telly Zachariades, head of global chemicals for Bear Stearns.

“We traditionally see M&A activity heating up towards the end of the cycle,” he said. “This year will see strong activity, but these conditions won’t last forever.”

Look for the full M&A outlook for 2006 in CMR’s 13 February issue. www.chemicalmarketreporter.com.

By: Joseph Chang
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