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Chemical M&As “maintaining momentum”: report

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Canadian Plastics

Merger and acquisition (M&A) activity has maintained strong momentum during the first half of 2007, according to th...

Merger and acquisition (M&A) activity has maintained strong momentum during the first half of 2007, according to the new quarterly Chemical Compounds report by PricewaterhouseCoopers. The report found that Western Europe still maintains the highest deal value, but a larger number of deals are occurring in North America.

Overall, in terms of value, 2007 outpaced the first half of 2006 due to the large value of “mega-deals,” the report noted.

Movement in the specialty chemicals segment accounts for most of the activity so far this year, which increased from US$28 billion in 2006 to more than US$40 billion in the first half of 2007. Recently announced deals also indicate that there will be a significant increase in M&A activity in the commodity chemicals sector.

Additionally, strategic investors contributed to almost three-quarters of total chemical M&A activity this year, and accounted for the top two largest mega-deals in both 2006 and 2007. Financial investors contributed to the remainder, and private equity investors were active in the bidding process for several transactions.


“We have seen evidence that chemical companies have been taking advantage of the current economic environment to make major changes in their portfolios or ownership structures,” said PricewaterhouseCoopers global chemicals leader Saverio Fato. “Also, as a result of some private equity firms making major investments in the mega-deal category, we could see additional mega-transactions as these firms look to exit these investments.

“The structure, valuation and timing of these exits may, however, be impacted by the severity and duration of the recent shifts in the financing markets.”

North American-based companies accounted for 84 large deals collectively worth US$54 billion, 41 per cent of the total value that changed hands. The bulk of these transactions took place in the U.S., and 13 were mega-deals exceeding US$1 billion.

The researchers noted that average deal values in both North America and Western Europe were significantly higher than in the rest of the world.”Consistent with the trend during the past three years, deal value continues to be higher in Western Europe than in the U.S.,” said U.S. chemicals leader Tracey Stover. “This could be due to the relative weakness of the U.S. dollar compared to other major currencies, which would tend to make acquisitions in the U.S. less expensive.”


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