VIDEO: Global chemical M&A is taking off: investment bank

09 September 2013 09:00  [Source: ICIS news]

LONDON (ICIS)--After a lacklustre 2012 and early 2013, chemicals mergers and acquisitions (M&A) activity has started to pick up, according to investment bank The Valence Group.

In a video interview, partner Anton Ticktin says the most significant long-term trend has been Middle East and Asian companies moving downstream into intermediates and specialties while steering away from the upstream commodity area.

This has meant that European and US companies have had to realign their portfolios.

“European companies had a very impressive technological advantage in the intermediates space - products such as caprolactam, the ethylene oxide (EO) chain and isocyanates. Now we’re seeing some of that is being taken by Middle East and Asian competitors.”

He said that European companies are now tending to move further downstream. “DSM is typical of that, moving away from commodities and even intermediates and further downstream where there are barriers to entry where it is all about service, technology and R&D.”

US shale gas is also affecting M&A because a lot of global players want to access the cheap feedstocks it offers, said Ticktin.

“M&A activity will be strong because people want to have a piece of that shale gas advantage. Q2, Q3 and Q4 look very strong … and this will continue into the first half of 2014 for sure. A lot of companies have put businesses up for sale or undertaken strategic reviews such as DuPont, Dow, Ashland and others.”

Commenting on the industy’s ability to cope with the cyclical nature of its markets, Ticktin said: “With a broader view – over the last 10, 20, 30 years you see that the chemical industry has managed its revenue and profitability in a much more professional way than in the 1980s and 90s when people focused on volume and trying to fill their plants with disastrous effects on profitability.”

He added that even in 2009 companies managed to maintain profitability through quite a serious downturn. Since then through the downturn of 2009-12 companies have managed their profitability much more effectively, keeping revenues and profits high.

The Valence Group sponsors the ICIS Top 100 Chemical Companies. Watch the video interview and download the ICIS Top 100 Chemical Companies by clicking here.

By: Will Beacham
+44 20 8652 3214

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