NEW YORK, August 5, 2014 ― Chemicals mergers and acquisitions (M&A) activity in the second quarter of 2014 more than doubled in value and volume when compared to the same period last year, according to PwC US. Mid-market transactions ($50 - $250 million) accounted for 68 percent of total deal activity and over 20 percent of value, helping push total second quarter deal value to more than $12 billion.
During the second quarter of 2014 there were 40 chemicals transactions valued at $50 million or more, totaling almost $12.5 billion, compared to 36 deals representing $14.1 billion in the first quarter of 2014 and 17 deals worth $5.4 billion in the second quarter of 2013. Acquisitions involving specialty chemicals contributed a large portion of the quarter’s deal value, with almost 50 percent of activity, accounting for $10.9 billion in deal value. Deals involving financial acquirers continued to rise, hitting 23 percent of total deal volume, compared to 13 percent of activity for all of 2013.
“The chemicals M&A environment continued to pick up from the first quarter, led by corporate deals and midmarket transactions in advanced economies,” said A.J. Scamuffa, U.S. chemicals leader for PwC. “Specialty chemicals acquisitions were a key part of the M&A landscape, having been the focus of the largest deals in the quarter. At the same time, the proportion of deals involving financial investors continued to advance in the second quarter as private equity took advantage of opportunities to acquire divested corporate assets.”
According to PwC, the amount of deal activity by acquirers based in advanced economies continued to grow in the second quarter, accounting for 70 percent of the deals, compared to 66 percent in the first quarter and 47 percent of deals for second quarter 2013. This growth in activity related to advanced economies continued to be driven by increased optimism toward a resurgence in demand and the continued interest in chemicals assets that can maximize the energy savings presented by shale gas.
Four mega deals (deals over $1 billion) accounted for over 46 percent of the quarter’s deal value, or $5.8 billion, down from the first quarter’s five mega deals worth $6.4 billion, but up substantially compared to the second quarter of 2013 which had one deal worth $3.8 billion.
Asia and Oceania led global deal volume, responsible for just over half (21) of the second quarter’s deals, valued at $4.9 billion. China was a key driver of Asian deal activity with 12 deals valued at almost $1.4 billion. Japan and South Korea were also well represented, with three deals each. North America led the other regions in deal value, with 18 transactions valued at more than $8.2 billion. In North America, the United States drove volume and value in the region, with 17 deals valued at more than $7.9 billion. South American, specifically Brazil-based companies, were responsible for 10 percent of the quarter’s deal activity valued at $533 million.
“Chemicals M&A value and volume is on track to exceed 2013 levels,” noted Scamuffa. “Assuming continued economic growth, we expect a strong finish in the second half as strategic buyers continue to look at inorganic growth as a means to improve efficiency and bolster economies of scale. At the same time, financial investors are looking to improved demand in the chemicals sector to drive increased returns.”