In the past year alone, the total amount of global chemical bulk M&A transactions (over $25 million in each transaction) was estimated to exceed US$40 billion, and the number of completed transactions was close to 90. In the first three quarters of 2014, the volume of global chemical M&A transactions reached 30.9 billion U.S. dollars, equivalent to the total transaction volume in 2013. In the first three quarters of 2014, the number of bulk M&A deals completed by the global chemical industry reached 64, while the number of transactions completed in the same period of 2013 was 59, an increase of 8% year-on-year. Whether the new year's chemical M&A market will continue its strong momentum in 2014? Both investment banks, corporate investors, and even CEOs of chemical companies expect that the M&A transaction activity in 2015 will continue to increase compared to 2014.
Investment Bank: Chemical mergers and acquisitions are strong
Peter Young, chairman of Young & Partners, the US investment bank, recently stated: “The dramatic increase in global chemical M&A transaction activity since the second half of 2014 will continue into 2015. Potential demand growth and sufficient cash flow are already driving strategic buyer’s M&A activity. , and easy access to low-cost debt financing will continue to promote the financial buyers' business acquisition activities."
Most investment banks believe that the global chemical M&A transactions will continue to perform strongly in 2015 as strategic buyers and private equity buyers seek M&A opportunities. Substantial improvements in corporate balance sheets and easily accessible low-interest financing are supporting higher transaction valuations. Under the condition of increasing global economic uncertainties, how chemical companies achieve growth has become the focus of attention in the industry, and maintaining profitability through mergers and acquisitions transactions has become a mustache.
Telly Zachariades, partner of Valence Group, an investment bank, stated: “A number of factors are driving extraordinary and robust growth in the chemical M&A market. The assets that have been announced for sale and assets that are expected to be sold in the market have already been foreseen. In the first half of 2015, the M&A market will be strong."
Bernd Schneider, general manager of the investment bank's N+1 company and head of the chemical business, said: “We expect the strong momentum of global chemical M&A transactions will continue in 2015. On the one hand, the overall liquidity of the market is better, and financing is also easily accessible; On the other hand, strategic buyers and financial investors are actively seeking mergers and acquisitions in the chemical business. The owners of chemical assets will pay close attention to the current attractive valuation levels to make the final strategic choice."
CEO of the company: M&A confidence index rises
According to investment bank surveys, the confidence index of chemical industry CEOs for the implementation of M&A transactions is continuously growing, especially the CEO of American chemical companies.
Li Lan Harris, general manager and head of chemical business at Valianco, an investment bank, said: “Currently, the balance sheets of chemical companies have greatly improved. Chemical companies now have confidence in the way business growth is achieved through business acquisitions. ."
Vallys Group partner Telly Zachariades stated: “The CEOs of chemical companies are more confident in M&A transactions. Shareholders have already actively supported the growth of chemical companies through business mergers and acquisitions.â€
For this phenomenon, KeyBanc company Toukan explained: "For enterprises, the main problem is how to achieve business growth. In the past year, the global chemical market has only grown by 2%. Faced with this situation, chemical industry Corporate CEOs are more concerned with business acquisitions."
Investors: Stripping off "catalytic" business
The Valence Group Telly Zachariades stated: “Global chemical companies are continuing to actively restructure their businesses, sometimes by companies themselves, and sometimes by pressure from active investors. Active investors often act as chemical companies to accelerate or stimulate restructuring. The catalyst."
According to industry insiders, in fact, active investors have become a major force in pushing chemical companies to sell assets and spin off business operations, especially in the US chemical industry. Active investor targets have been locked in, including Dow Chemical, DuPont, Ashland, Ferro, American Pacific, Air Products, Calgon Carbon, MeadWestvaco, Innophos and OMNOVA Solutions.
KeyBanc's Toukan said: "In the past 18 months, we have seen active investors promote the business restructuring of chemical companies more than the sum of the past 10 years."
Due to the pressure from active investors, Dow Chemical is divesting its chlor-alkali and derivatives business and raising its divestiture target from US$4.5 billion to US$6 billion by the end of 2015 to 7 billion to 8.5 billion by 2016 Dollars. In December 2014, Dow Chemical agreed to sell Angus Chemicals, a manufacturer of additives and intermediates, to private equity firm Golden Gate Capital at a price of 1.2 billion U.S. dollars, and to sell to Vertellus Specialty Materials at a total price of 225 million U.S. dollars. The company's borohydride business and the sale of its polyolefin film unit in Ohio, USA, to Valgroup Packaging Solutions.
DuPont plans to spin off its performance chemicals business before mid-2015. The division includes the world's largest titanium dioxide business. In December 2014, Ashland completed the sale of its elastomers business to Lion Co.
OMNOVA Solutions Inc. is becoming the goal of active investor Barrington Capital. Ballington Capital Corporation is pushing OMNOVA Solutions to sell its engineering surface business, including decorative parts and functional surface businesses in the construction and automotive sectors.
Vallys Group partner Telly Zachariades said: "For active investors, chemical companies are relatively easy to capture 'prey', can easily find chemical companies with multiple business units. These business units are usually cyclical , or tend to be bulk, or low growth, then the active investors will request the company's board of directors to peel off these business requirements. In 2015 we will still see more active investors promote chemical companies. Divesting activities."
Uncertainty Factors: Financing Market Geopolitics
While the industry was optimistic about the global chemical M&A market in 2015, it also remained calm.
Mario Toukan, head of chemical investment business at KeyBanc Capital Markets, said that in the first quarter of 2015, the global chemical M&A transaction market will remain active and some new deals will follow. But potential sellers feel a little uneasy, because the financing market has already shown initial signs of weakness. Sellers who wish to sell chemical assets have accelerated the sale process.
Peter Young said that the tense geopolitical and unoptimistic global economic outlook is causing uncertainty for the future demand for most chemicals. N+1 company Schneder said: “The biggest risks in the chemical M&A trading market are the escalation of geopolitical risks in Ukraine, Russia, North Africa, Thailand, Israel/Gaza, and Turkey, because the chemical industry is one of the most globalized industries. Regional geopolitical risks will have a negative impact on the entire industry."
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