US chems rush to close M&A deals by year end - banker

17 November 2010 22:54  [Source: ICIS news]

NEW YORK (ICIS)--Sellers of chemical assets in the US are rushing to close deals by the end of the year to avoid potential tax hikes, an investment banker said on Wednesday.

“There’s a big glut of deals waiting to get done by year end in the US – it’s a tax-driven situation,” said Chris Cerimele, director and head of chemicals at US-based investment bank Houlihan Lokey, in an interview with ICIS.

“Because of that focus on closing deals before the end of the year, the near-term pipeline of new transactions for next year is relatively soft. Activity in the first quarter of 2011 is likely to be lower than in the fourth quarter of 2010,” he added.

The Bush administration’s tax cuts are set to expire at the end of 2010. While these cuts could be extended, sellers aren’t taking any chances, the banker noted.

For 2011, Cerimele said he expects a solid year, driven by many positive factors.

“2011 has the potential to be a better year because corporations have a lot more cash from solid operating performance, and there are no indications that the financial markets will worsen,” he said.

In addition, chemical companies will continue to seek to divest non-core assets, said the banker.

“There is still plenty of room for companies to consider divestitures – that kind of activity will remain steady,” said Cerimele.

“Many corporations would have liked to trim their portfolios in 2008–2009, but weren’t able to, and are now trying to take advantage of the improved market,” he added.

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