InterviewBig LBO market cold; mid-market healthy

18 January 2008 20:23  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--The blockbuster leveraged buyout market is frozen, but mergers and acquisitions (M&A) activity will focus on the middle market with deals in the $500m (€340m) and below range, the chemical banker at KeyBanc Capital Markets on said on Friday.

“The larger deal activity has really seized up. Leveraged transactions north of $1bn are just not happening because the financing is not available,” said Leland Harrs, managing director of the chemical team at investment bank KeyBanc Capital Markets.

“That will not change until the backlog of bridge loans and commitments clears up, and that will take several quarters at a minimum,” Harrs continued.

The activity will be focused in the middle market, in the range of $500m and below, according to Harrs.

“There will be a lot of activity in the mid-market area and smaller transactions that are not driven by the high yield debt market or bridge loans,” he said. “We’re going to see many bolt-on acquisitions and we don’t see activity slowing down in this area.”

Even private equity firms will participate in mid-market deals, said the banker. “There are a lot of financial sponsors that focus on midsized deals, and they still have lots of money to put to work,” Harrs said.

Areas in specialty chemicals such as adhesives, sealants and coatings will continue to see healthy M&A activity, he said.

However, buyers will have to put in more equity to get deals done, even in the middle market, said Harrs. “In some cases, financial sponsors are willing to finance the entire acquisition with cash, thus eliminating financing contingencies.”

Certain strategic buyers with strong balance sheets are still in a position to make large cash acquisitions, Harrs added.

“Companies such as Dow Chemical and PPG Industries can still do big deals with no major problems,” said Harrs. “Balance sheets in the chemical industry are generally better than they were a few years ago.”

($1.00 = €0.68)

By: Joseph Chang
+1 713 525 2653

< previous article(ICIS Chemical Business podcast November 2, 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly