M&A Deal Activity for Global Chemicals Sector Up 45% in First Half of 2010 Over First Half of 2009, According to PricewaterhouseCoopers

NEW YORK, Aug. 5 /PRNewswire/ -- Merger and Acquisition (M&A) deal volume in the first half of 2010 was up 45 percent for deals with a disclosed value of greater than $50 million, compared with the same period last year, according to a new PricewaterhouseCoopers LLP report, Chemical compounds: Second-quarter 2010 global chemicals industry mergers and acquisitions analysis.  Disclosed deal activity in Q2 reached only $8 million, a significant drop from the prior quarter when almost $18 billion in deal activity was disclosed; however, the Q2 total was still comparable to the levels seen in 2009.

In Q2 2010, two large deals (deal value greater than $1 billion) were announced, a drop compared to Q1, in which there were five large deals announced. For 2010, there were a total of seven deals valued greater than $1 billion, which already exceeds the six seen in all of 2009, and the total deal value of those seven large deals in the first half of 2010 already exceeds the total large deal value from full-year 2009.

"Activity in the chemicals sector continues to show that companies are extending the time they take to finalize deals, tied with an increasingly strong focus on the importance of planning, diligence and negotiations," said Tracey Stover, global chemicals leader for PricewaterhouseCoopers. "We see an increase in the size of deals in the pipeline, many of which have not yet been announced, so assuming those deals close as expected, we anticipate both the average deal size and total number of deals to increase in the second half of 2010."

The number of deals announced by strategic investors continues to outpace deals announced by financial investors.  While improvements in the financial markets has lead to a greater level of private equity activity in certain deal processes, strategic investors maintain a higher level of activity for several reasons, including that borrowing conditions remain tight enough to give strategic buyers with sound business cases an edge in the bidding process over pure financial buyers. Additionally, many strategic investors have come through the economic downturn with relatively strong balance sheets and continue to look at using M&A as a tool to both reposition and grow their companies.

"In analyzing the volume and value of deal activity during the past 13 years, we were able to gain a longer-term perspective on deal activity trends in the chemicals sector," added Stover. "Our analysis confirmed that while large deal volume drops significantly during periods of economic downturn, we can expect an increasing uptick in deal activity in the pipeline as the economy continues to recover."

Consistent with trends expected in 2010, the second quarter saw a rise in cross-border deals. In total, of the 23 announced deals with a value greater than $50 million, seven were cross-border deals, representing $4.5 billion or 66 percent of total deal value for the second quarter of 2010. The acquirers were evenly spread throughout the world, with active target nations within Asia, North America, and South America.

Capturing Synergies to Maximize Deal Value

The second quarter Chemical Compounds report takes a closer look at the importance of the merger integration planning process, especially in today's recovering economy. Chemical companies must balance a desire to quickly reach the finish line with a need to systematically leverage synergies and contain costs.

For chemical companies that deal with environmental, health, and safety issues associated with the handling of hazardous materials, there is an added complexity of aligning the processes and procedures of the two entities. The integration of two chemical companies also requires careful supply chain analysis to ensure end-to-end coordination so that the new company realizes the benefits of the transaction.

The report states, closing deals is tough, but capturing deal value is tougher. In some ways, deciding whether to go forward with a merger or acquisition is the easy part. The act of "owning" after the transaction is complete is the real challenge. In the end, the market will reward or punish shareholders of the combined company depending on how well its management succeeds at achieving stated deal objectives. So, it is imperative that they realize synergies, capture deal value, and share the results with all of those who have a stake in the outcome.

For information on Chemical compounds and to access the full report, including the special section on merger integration planning and capturing synergies to maximize deal value in the chemicals industry, 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.

About PricewaterhouseCoopers

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