InterviewChemical M&A market ‘eerily quiet’ – banker

01 June 2012 19:28  [Source: ICIS news]

NEW YORK (ICIS)--The chemical mergers and acquisitions (M&A) market is “eerily quiet,” as concerns about Europe’s debt crisis is dampening activity, one investment banker said on Friday.

“People are worried about Europe – that tops the list of why we’re not seeing as much deal activity this year,” said Leland Harrs, managing director of US-based investment bank The PrinceRidge Group.

“The high yield debt and equity markets are backing off as well, and that’s causing a lot of hesitation among buyers,” he added.

The financing markets are “a bit choppy now,” said John McNicholas, head of investment banking at PrinceRidge.

“Europe is clearly dampening enthusiasm. However, credit markets are still open, especially in the US – it’s just that lenders are a little more selective on financing deals,” he added.

In addition to macro events in Europe hindering deals, there is a lack of quality chemical assets on the selling block, Harrs noted.

“As we are not in a trough in the chemical cycle, there is not a huge flow of corporate restructuring that would prompt many divestitures,” said Harrs.

Yet because of the scarcity of attractive assets for sale, if one does come up for sale, “there will be good demand for it,” the banker said.

“The fundamental outlook is reasonably good. It’s just that Europe is a big question mark right now, and that’s holding everyone back,” he added.

McNicholas sees the possibility of a pick-up in M&A and financing activity heading into 2013 if certain issues can be resolved.

“Europe needs to sort itself out, and we have election in the US as well. If we can get more clarity on Europe and a couple of breaks on the macro level, I think trends are favourable for a pick-up later in the year going into 2013,” he said.

Positive factors for M&A include strategic buyers sitting on piles of cash, and cheap US natural gas providing lower feedstock and energy costs, said McNicholas.

By: Joseph Chang
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