M&A Deal Activity for Global Chemicals Sector Remains Strong in Q1 2010, Showing a 15% Year-Over-Year Increase, According to PricewaterhouseCoopers

NEW YORK, May 5 /PRNewswire/ -- Merger and Acquisition (M&A) deal activity in the global chemicals industry was much stronger in the first quarter of 2010 than the first-quarter of 2009, increasing by 33 deals or 15 percent, according to a new PricewaterhouseCoopers LLP (PwC) report, Chemical compounds: First-quarter 2010 global chemicals industry mergers and acquisitions analysis.  When looking at deals with a disclosed value greater than or equal to $50 million, activity is up by 11 deals or 110 percent over the same time period. With the financial markets and global economy beginning to recover, these results are consistent with expectations.

Large deal activity is off to a strong start in Q1 2010, as five deals with a value greater than $1 billion were announced, substantially driving total deal value. These five deals accounted for $17.9 billion in deal value, representing 80 percent of total activity in the first quarter of 2010 already surpassing total large deal activity for all of 2009. Excluding large deals, the average deal size in Q1 2010 remained relatively consistent with all of 2009 at $43 million (107 deals) in Q1 2010 compared with $42 million (401 deals) for all of 2009.

"Based on our current view of the market and the transactions in progress, we are optimistic that the level of M&A activity will remain strong in 2010," said Saverio Fato, global chemicals leader for PricewaterhouseCoopers. "Proactive companies in the chemicals sector that are willing to invest up-front time preparing for deals so that they can move quickly as opportunities become available will be able to effectively utilize M&A as a growth tool to reposition themselves."

The trend of fewer deal announcements by financial investors has continued into the first quarter of 2010, with only 11 percent of deals including a financial investor compared with 20 percent in 2007. As the economy and the debt markets continue to recover, it is possible that we will see a higher level of financial investor deal activity in the chemical sector. In fact, we have already seen some financial investors come off of the sidelines and actively participate in the bidding process for several of the recent deals.  One of the large deals in the first quarter of 2010 was made by a financial investor, in contrast to 2009 when no acquisitions were made by financial investors.

The five large deals were the primary drivers of the trend in terms of deal value in the first quarter of 2010. While there was strong activity in Asia and South America, deal value was relatively low due to a lack of large deals. In addition to a disproportionately high value in North American deals, driven by several of the large ones, the majority of deal activity was intra-country, with only 22 of the 112 announced deals with a disclosed value being cross-border deals ($5.8 billion of the total $22.5 billion deal value).

M&A Due Diligence in a Recovering Economy

The first quarter Chemical compounds report takes a closer look at the importance of a tailored M&A due diligence approach in a recovering economy. As the global economy begins to recover, acquisition growth may allow certain chemical companies to push ahead of the competition.  It will be the companies with strong balance sheets and robust cash reserves that are in the best position for strategic merger and acquisition opportunities. To prosper from acquisition growth in this environment, companies will not only need the financial wherewithal to execute the deals,  but an approach that allows them to move quickly in valuing and structuring deals in a new and challenging environment.

To get the deals done properly, chemical companies should consider how two years of economic contraction have altered the balance of supply and demand within the value chain, as well as the cost structure impact of certain issues including healthcare, climate change, commodity prices, pension plan structures, and changing tax laws.

M&A activity inevitably generates a certain amount of immediacy, so it pays to be prepared. According to the report, companies with leading practice M&A processes begin the process long before the company is available for sale and are therefore prepared to move quickly.  Those companies that view M&A as a perpetual, proactive process are better prepared to outmaneuver companies that are only reactive to opportunistic deal flow.  

For information on Chemical compounds and to access the full report, including the special section on innovative solutions for economic recovery, visit: http://www.pwc.com/us/industrialproducts.

About PricewaterhouseCoopers Global Chemicals Practice

PwC's Chemicals practice is a global network of professionals who provide industry-focused assurance, tax, and advisory services to more than 200 public and private chemical companies and includes dedicated deal specialists

About PricewaterhouseCoopers

PricewaterhouseCoopers (http://www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

© 2010 PricewaterhouseCoopers LLP. All rights reserved.

SOURCE PricewaterhouseCoopers