Chemical M&A Volume

Above is an update of the global M&A volume for the chemical industry. 2009 was a difficult year for transactions worldwide and as you can see the chemical industry was no exception. Deal volume fell back to levels comparable to the 2002 - 2003 time frame. In fact, Dow Chemical represented the majority of 2009 deal volume with its acquisition of Rohm & Haas and subsequent divestitures. BASF also rang in $5 billion in transaction value with its acquisition of Ciba Specialty Chemicals. We also saw a variety of take-privates as low trading values of several public companies made them attractive take-over targets. Commodity sectors saw a good amount of activity as strategics looked to consolidate on a global basis, survive and prepare for an economic recovery. Fertilizer and agrochemical industries also saw healthy activity as the sector is coming off a high-margin environment with strong balance sheets and will look to put their cash to use and expand globally.

New Leadership at RSM McGladrey

C.E. Andrews joins us as President of RSM McGladrey. You can find the press release here.

Global Chemical M&A Volume Update

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.

Chemical Industry: Strategic vs Financial Buyer Multiples

I recently updated my chemical industry deals database. This data is a constant work in progress, will be further refined, updated and made available in our future newsletters. Key highlights - notice how the financial buyers ended up outbidding strategics in 2007, and notice how quickly their valuations drop with tight financing. Then notice how valuations from both types of buyers fall off as the economy comes to a screeching halt.

If you are with the press and want to use this data please call me to discuss.

(Data prior to 2000 from 3rd party sources)