NEW YORK, April 28, 2014 ― Chemicals mergers and acquisitions (M&A) activity in the first quarter of 2014 increased 21 percent over the same period last year, driving total deal value in the space to more than $12 billion, according to PwC US. Deals involving financial acquirers jumped to almost 21 percent of total deal volume while deals in advanced economies dominated first quarter volume.
During the first quarter of 2014 there were 29 chemical transactions valued at $50 million or more, totaling $12.1 billion, compared to 24 deals representing $5.4 billion in the first quarter of 2013. However, first quarter deal value dipped from $22.9 billion in the fourth quarter 2013, primarily due to having two fewer mega deals (deals over $1b) in the first three months of the year. The majority of activity, or 16 deals, was concentrated on a large presence of mid-market deals ($50m - $250m). Mega deals contributed to 53 percent of deal value with five announced transactions worth $6.4 billion.
Financial investors remained active coming off of their strong fourth quarter levels accounting for almost 40 percent of total deal value, including executing on two of the five largest deals of the first quarter.
“Deal activity remained robust in the first quarter and was in line with the three year average of activity,” said A.J. Scamuffa, U.S. chemicals leader for PwC. “Financial investors are increasing their activities in the industry, capitalizing on the ongoing wave of corporate divestitures and game changing opportunities presented by the abundance of shale gas. We’re also seeing a range of deal strategies being deployed, including spinoffs, which are providing well-aligned businesses viable strategies to execute on market opportunities and unlock shareholder value.”
Acquirers in advanced economies were responsible for 65.5 percent of deals, up from 56.7 percent in the previous quarter. “An improved economic outlook in advanced nations, especially the United States and Eurozone are providing domestic dealmakers in these regions with opportunities to source deals with lesser downside to their operations and supply chains and stronger long terms prospects for growth,” added Scamuffa. “At the same time, stronger U.S and European markets are attracting foreign investors giving rise to greater competition for assets and we expect the momentum to carry out through the remainder of 2014 as the global economic landscape strengthens.”
North America managed to bolster a healthy 12 deals worth $6.8 billion, mostly driven by the United States, which was responsible for 10 deals worth $6.2 billion. China remained a key driver of Asian deal activity, which combined with Oceania led globally – totaling 19 deals valued at $6.0 billion dollars, with China accounting for 13 of those and $3.6 billion of the value. Despite a slowdown in the Chinese economy, the nation still outpaces most others in terms of deal activity. PwC expects China’s chemical industry to continue expansion, driving further acquisitions.