16 March 2012 16:40 [Source: ICIS news]
PRAIA DO FORTE, BRAZIL (ICIS)--Mergers and acquisitions (M&A) activity in the global chemical distribution market will remain strong in 2012, a consultant said on Friday.
“Chemical distribution M&A activity has returned to pre-crisis levels and we see a strong market in 2012,” said Guenther Eberhard, managing director of Switzerland-based DistriConsult.
“More large companies will seek to expand their geographic footprint in emerging markets such as Asia and Latin America,” he added.
Eberhard spoke at the 6th EBDQUIM conference hosted by Associquim/Sincoquim (Brazilian Association of Chemical and Petrochemical Distributors).
“The large distributors such as [Germany’s] Brenntag and [US-based] Univar are well covered in Europe and the US, so you may only see selective acquisitions there,” said Eberhard.
The European Commission (EC) is also taking a firmer stance on distributor consolidation, noted the consultant.
Yet size matters in chemical distribution, and will continue to be a driving force in M&A, he said.
“Regulatory as well as quality and service related requirements lead to an increasing need for in-house expertise,” said Eberhard.
M&A activity should also be expected from the mid-size privately-held or family-owned companies, said the consultant.
“Here we will see selective acquisitions to increase critical mass. Typically these companies will stay in their home geographies or adjacent geographies,” Eberhard noted.
Both large companies and privately-held mid-size companies have the financial firepower to buy assets, he said.
“Private companies accumulated funds after the financial crisis in 2008-2009, while Brenntag raised funds through its 2010 IPO [initial public offering] and is deleveraging,” Eberhard pointed out.
On the other hand, private equity companies are looking at chemical distribution assets but have not pulled the trigger.
“It is still difficult for them to finance these deals to meet their required rate-of-return models,” said Eberhard.
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