Large M&A activity declines in fourth quarter - US PwC

17 February 2009 19:54  [Source: ICIS news]

HOUSTON (ICIS news)--Large M&A deal activity within the global chemicals industry fell sharply in the fourth quarter, as full 2008 year-end deal value came in $10bn (€7.8bn) short of third-quarter expectations, US firm PricewaterhouseCoopers (PwC) said on Tuesday.

The fourth quarter saw only 84 deal announcements with a disclosed value of $6bn, bringing the 2008 total to 869 deals completed at $54bn. The third-quarter PwC report estimated that the 2008 deal value would close at $64bn.

The $54bn total deal value also represents less than half of the $119bn total deal value in 2007.

While the 869 overall deals completed marks a slight increase over 2007’s 853 deals, transactions of greater than $50m fell significantly. In 2008, 83 such deals took place, compared with 124 in 2007.

Large deals with a value of at least $1bn declined the most, representing $38bn in 2008 after making up $91bn in 2007.

“Financial market turbulence has made an impact on all aspects of the chemicals industry value chain,” said Saverio Fato, global chemicals leader of PwC. “While small and mid-sized deals kept M&A volume on track through 2008, the chemicals industry remains highly susceptible to demand fluctuations caused by the current market environment.”

The largest deal announced during the fourth quarter was Lucite’s $1.6bn acquisition of Mitsubishi Rayon.

For the year, North American chemical companies remained the main contributor to total deal value, with 56% as targets and 51% as acquirers.

However, Asia captured the majority of deal volume with 45% of the total deals announced in 2008.

In the report, PwC predicts an uptick will occur in 2009 with cross-border deals, as companies continue to invest in low-cost infrastructure available in foreign markets.

“Changes in M&A size and target regions can and should be expected,” said Tracey Stover, US chemicals leader at PwC. “Smaller bolt-on mergers are likely to emerge in the beginning of 2009, as the industry utilises ‘survival of the fittest’ tactics to maintain their bottom lines.”

($1 = €0.78)

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By: Ben DuBose
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