15 February 2012 20:42 [Source: ICIS news]
NEW YORK (ICIS)--The global chemical mergers and acquisitions (M&A) market is in transition to a slowdown from a strong 2011, when the dollar value of deals hit a record, an investment banker said on Wednesday.
“We believe the chemical M&A market has already peaked in terms of deal volumes and valuations,” said Peter Young, president of US-based investment bank Young & Partners, at a joint meeting of the Societe de Chimie Industrielle and the Racemics group in New York.
“M&A valuations peaked during 2011 and began to soften towards the end of the year,” he added.
In 2011, a record $82bn (€62bn) in deals over $25m in size were completed in the global chemical industry – up from $39bn in 2010, noted Young.
The number of deals was strong at 83 in 2011 versus 63 in 2010, but it did not break a record, he added.
Strategic buyers took over the M&A playing field in 2011 while financial buyers were constrained by the lack of available high-yield debt financing, the banker said.
“With easy availability of low-cost debt, excess cash and shareholders pushing for growth beyond organics growth, industrial buyers became more aggressive in 2011,” Young said.
However, the pipeline of deals through 2011 illustrated the slowdown taking place, he pointed out.
As of 31 December, there were 14 deals worth $4.8bn announced but yet to close. These figures were down from 16 deals worth $11.3bn at the end of September 2011, and down from 23 deals worth $34.0bn at the end of June 2011, according to Young & Partners.
“This, without question, is a clear sign that we are experiencing a slowing M&A market,” said Young.
“Unless there is a severe financial and economic downturn, M&A in 2012 will be solid, but not up to the levels of activity in 2011,” he added.
($1 = €0.76)
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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