InterviewChemical M&A activity has likely bottomed out

15 August 2009 16:34  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--The global chemical mergers and acquisitions (M&A) market has likely bottomed, a banker said on Friday.

“In the last two months, the level of discussions on chemical M&A has increased. People that had held off during the economic and financial crisis are now coming back to the table,” said Chris Cerimele, managing director and co-head of global chemicals at the investment bank, Lincoln International.

“Through the first half, most companies just froze - they didn’t know where the economy and or [their] own businesses were headed,” he added.

The avalanche of sales of distressed assets that many were expecting failed to materialise in the first half, Cerimele said.

“Lenders in the first half were a lot more willing to restructure existing debt and work with companies rather than push them into bankruptcy,” Cerimele said.

“The old strategy was to put a company into Chapter 11 [bankruptcy protection] and then sell off some assets to raise cash, but [with] no DIP [debtor-in-possession] financing available and the M&A market dead, that wasn’t an option. So many lenders have granted waivers and extensions in exchange for re-pricing the debt,” he added.

Even companies that have gone into bankruptcy have been focused on restructuring their debt rather than selling off assets, Cerimele said.

Now that the economy has stabilised and companies have some level of earnings visibility, companies are considering M&A once again, he said.

“The M&A market is allergic to instability and uncertainty. Business can be flat for awhile, but as long there’s stability, it is conducive to doing transactions,” Cerimele said.

“While the floodgates are not likely to open in the fourth quarter, we have probably seen the bottom in the M&A market,” he added.

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By: Joseph Chang
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