The blog gained some key insights into the current M&A landscape this week, at the annual Pilko & Associates Round Table, co-organised with Shell Chemicals and leading law firm Allen & Overy:
• M&A has become a 'buyer's market', and this is not expected to change in the near future.
• Credit markets remain cautious. Liquidity exists for big corporates, but investors are not confident there will be a sustained profit rebound for petchems, given the amount of new capacity about to come online.
• Maximising the competitive advantage of their own specific operations is the only way for companies to counter this perception.
• Working capital is tight down the value chains, with banks still reluctant to lend, and this is adding to market volatility for many products, as CFO's seek to reduce inventory.
• Companies in emerging economies are looking to establish 'gateways' into developed economies, with a focus on acquiring routes to markets.
Significantly, a major amount of time was spent discussing the potential implications of the Deepwater Horizon oil rig disaster in the US Gulf. This is expected to create a sea-change in risk management. There are clear parallels being drawn with the banking Crisis, where self-regulation has also seemingly failed to provide the results expected by government.
Companies can therefore expect to see increased regulation, as part of the public's increasing distrust of business ethics. Regulators will probably set more rules, and become more pro-active in ensuring the required measures are being carried out. This will increase costs, and limit operational freedom.