M&A deals plunge in 2009, expected to grow in 2010 - PwC

12 February 2010 13:00  [Source: ICIS news]

Merger and acquisition deals plungeHOUSTON (ICIS news)--The value of announced merger and acquisition (M&A) deals in the global chemicals industry fell by more than 50% last year amid the stalled economy but was likely to increase in 2010, PricewaterhouseCoopers (PwC) said on Friday.

Overall, the value of M&A deals in 2009 fell to less than $30bn (€22bn) from $64bn in 2008, according to a report issued by the US accounting firm.

Deals valued at $1bn or more fell the most, PwC said. There were only five deals above $1bn announced in 2009, compared with 12 in 2008, it said.

Only one large deal was announced in the fourth quarter: Mitsubishi Chemical Holdings’ $2.4bn tender offer for Mitsubishi Rayon to acquire the remaining 99.34% stake that it does not already own, PwC said.

Other large deals announced during 2009 were: Agrium’s bid for CF Industries, CF Industries’ bid for Terra Industries, Sinochem’s bid for Nufarm, and Kali and Salz's (K+S) acquisition of Morton Salt.

PwC counts M&A activity by the number of deals that are announced during a period, but not necessarily completed.

Three of the five deals announced in 2009 were in the agricultural chemicals segment, driven by long-term confidence in that sector, PwC said.

Total M&A activity in 2009 amounted to 746 announced deals, which was 17% less than the deal volume in 2008, PwC said.

Also, financial investors accounted for a smaller percentage of total deal activity by value in 2009 compared with the previous three years, PwC said.

In 2006 and 2007, financial investors accounted for 25% and 22% of total deal activity, respectively.

“The economic downturn significantly impacted financial buyer deal activity, which dropped to 17% of the total in 2008 and down to 14% of the total in 2009,” PwC said.

In the fourth quarter of 2010, financial investor deal activity made up only 10% of the total and consisted primarily of smaller deals outside of North America, PwC said.

Total announced deals in the fourth quarter numbered 201 (including 79 deals with disclosed values and 16 deals valued at less than $50m), down from 225 in the fourth quarter of 2008 but up from 170 in the third quarter of 2009.

When measured by value, Asia accounted for more than 70% of the deal activity in the fourth quarter, and activity in Asia-Pacific was expected to remain high in 2010.

“Though overall deal activity in the global chemicals industry was down in 2009, there is reason for optimism,” said PwC global chemicals leader Saverio Fato.

“Recent months have shown an increase in activity across many of the industry’s sectors, although much of it continues to stem from small to mid-sized deals,” Fato continued.

“While we don’t anticipate radical improvements in the market in the short term, based upon the current economic conditions and the deal flow we've seen so far, we expect to see a higher level of deal activity in 2010 compared to what we saw in 2009.”

($1 = €0.73)

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