Global chemical M&A revival at hand - banker

03 May 2010 17:45  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Global chemical industry mergers and acquisitions (M&A) are on the upswing with clear signs of increased activity, the president of chemicals and life sciences investment bank Young & Partners said on Monday.

“There are clear signs of a revival in the M&A market with a thawing of credit, stabilisation of economies around the world, increasing buyer confidence, more realistic price expectations by sellers, a higher confidence in earnings and cash flow forecasts, and high cash balances,” said Peter Young.

“We expect the M&A market to improve substantially in 2010 over 2009. Only a drop into another economic recession or a major hit to the financial system will prevent this improvement in M&A,” he added.

In the first quarter of 2010, $4.5bn (€3.4bn) in chemical deals closed versus just $300m in the year-ago period and $25.4bn for all of 2009.

But more significantly, the number of completed deals over $25m in size rose to 15 in the first quarter - a major increase over activity in 2009. In 2009, there were four deals completed in the first quarter; seven in the second quarter; eight in the third quarter and seven in the fourth quarter, noted the banker.

And the backlog of announced deals yet to close totalled 12 transactions with a value of $19.0bn by 31 March versus five deals with a value of $6.3bn at the end of 2009.

Private equity buyers remained on the sidelines in the first quarter with only two deals completed versus four in all of 2010. Financial buyer market share of the M&A market continued to be low at 13% of the number of deals and 6% of the dollar value.

“However, there are clear signs of an increase in financial buyer transactions as debt financing availability continues to improve,” said Young.

“The financing market is improving, but still not that robust. Financial buyer activity will ease its way up,” he added.

In March, private equity firm Bain Capital agreed to buy US-based Dow Chemical’s Styron business for $1.63bn.

Styron included Dow’s polycarbonate (PC), acrylonitrile butadiene styrene (ABS)/styrene acrylonitrile (SAN) resins, polystyrene (PS) and styrene monomer operations, as well as the company’s stake in the Americas Styrenics joint venture with US major Chevron Phillips Chemical.

($1 = €0.75)

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By: Joseph Chang
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