The latest estimate of the global chemical industry M&A transaction volume is above. 2009 was a difficult year but volumes were boosted by Dow / Rohm & Haas deal closing. Further divestitures from Dow should pad volumes for the rest of the year (i.e. Morton / K+S). Also expecting other consolidation activity to generate volume. Commodity chemical producers are moving to consolidate or shut down after significant pressure from shrinking global economy.
Keep in mind that volumes will continue to be limited by the major financing trends. I recently chatted with some middle mkt lenders; Senior leverage is pretty much capped at 2.5x with covenants at 3.5x total leverage. S&P's LCD shows about the same in their latest data. Equity contributions on LBOs are also way up - ~43% in H2 2008 based on S&P's LCD. Cash-rich strategics will continue winning deals for at least next 12 months. Deals without solid strategic buyers will be limited to the 5 to 6x valuation range.
Keep in mind that volumes will continue to be limited by the major financing trends. I recently chatted with some middle mkt lenders; Senior leverage is pretty much capped at 2.5x with covenants at 3.5x total leverage. S&P's LCD shows about the same in their latest data. Equity contributions on LBOs are also way up - ~43% in H2 2008 based on S&P's LCD. Cash-rich strategics will continue winning deals for at least next 12 months. Deals without solid strategic buyers will be limited to the 5 to 6x valuation range.
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