CHICAGO, IL--(Marketwire - Mar 21, 2013) - Today A.T. Kearney released a global study focused on M&A activity in the chemical sector titled, "Chemicals Executive M&A Report 2013." The survey reveals that 55 percent of chemical industry experts expect an increase in chemical sector M&A activity in 2013. Executives believe this increase will be fueled by favorable financing conditions, continuous consolidation in Asia, regional expansion and access to low-cost feedstock in the U.S., Canada and Mexico. The report provides a 2013 outlook based on a survey of executives from leading chemical companies and investment banks, as well as an overview of 2012 M&A activity.
Andy Walberer, A.T. Kearney partner and co-leader of the Americas Chemicals Practice, commented, "Increased deal activity in the U.S. is driven by interest in access to low-cost feedstock and the recovery of select downstream markets, namely construction and automotive. Executives expect feedstock access to be pursued through both traditional M&A and through less traditional collaboration models including J&Vs, partnerships and long-term contractual arrangements by companies across the feedstock value chain."
2012 M&A Analysis
The analysis of 2012 M&A activity showed that deal activity declined significantly in 2012 across all regions and sectors as investors were concerned about the global economy and faced high valuations. Deal value plummeted to $49 billion in 2012 after a record year in 2011 ($151 billion) due to a lack of major deals; 2012 had the largest proportion of low-value deals in the past decade.
During 2012, most deal activity was centered in Asia, but North American acquirers and targets have now regained market share. U.S. companies were the most attractive targets with a 38 percent share of deal value ($19 billion) in 2012.
Kish Khemani, A.T. Kearney partner and co-leader of the Americas Chemicals Practice, observed, "While 2012 showed a sharp drop in deal value, smaller deals continued, with 65 percent of transactions smaller than $1 billion in size, the highest portion of small deals over the 2001-2012 period. While corporate-level M&A is down, M&A at the business unit level within companies continues to be a focus area for growth."
Thomas Rings, A.T. Kearney partner and global head of the Chemicals, Oil & Gas Practice, comments, "One cause for low deal activity in 2012 was the very high multiples from 2011. Potential acquirers were simply cautious to invest as they faced high valuation expectations from targets and high economic uncertainty."
2013 M&A Outlook
Despite continued uncertainty relating to global GDP growth and the debt crisis in the Eurozone, chemical executives expect deal activity to increase again in 2013. Sixty-four percent of executives indicate that favorable financing conditions and regional expansion plans of Asian companies pursuing growth through acquisitions in Western economies will drive M&A deal growth. Almost 57 percent of the respondents felt that M&A activity would be fueled by access to low-cost feedstock in the United States, Canada, and Mexico.
Executives expect alternative partnership models between companies to increase significantly in 2013 driven by a desire for feedstock, market and technology access. There is a mixed outlook for Europe as almost 70 percent of executives indicate that economic uncertainty and the economic crisis in Europe are impediments.
To access the full report, please go to http://www.atkearney.com/chemicals/ideas-insights/chemicals-executive-report-2013
About the Survey
The survey was conducted among executives from leading chemical industry players and investment banks between October 2012 and January 2013. Survey respondents were typically the head of the M&A department of chemical companies. Respondents provided their expectations on future M&A market developments on a Likert-type scale.
A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate, meaningful results and long-term transformative advantage to clients. Since 1926, we have been trusted advisors on CEO-agenda issues to the world's leading organizations across all major industries and sectors. A.T. Kearney's offices are located in major business centers in 39 countries.