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M&A deals get more complex

Chemical companies, Consumer demand, Economic growth, Financial Events
By Paul Hodges on 30-May-2011

M&A.pngAs always, the blog gained some key insights into the current M&A landscape this month, at the annual Pilko & Associates Round Table, co-organised with Shell Chemicals and leading law firm Allen & Overy.

Financing deals has become superficially much easier, as ‘risk-appetite’ has returned. In some areas, the market is more buoyant than in 2007/8.

But buyers are worrying more about the detail of deals. For example, working capital needs are now critically important, with today’s high oil prices. Those providing this finance need to manage their risk, by hedging sales forward. They also want to gain greater insight into the detail of the whole value chain, to better understand risks to current and future revenue streams.

Operational excellence is similarly becoming more important, alongside environmental performance. This is opening up a new market for insurers who have the capability to cover these risks on a cost-competitive basis.

In addition, buyers worry about rising political risk in many countries. They often want to better understand likely future government/opposition policies, as well as how media/general population attitudes might evolve.

As a result, deals are becoming more and more bespoke, with all those involved trying to understand and manage the 10/15 key issues that will drive future value.