Opportunity for bargain hunters to make acquisitions (chemical business)!

In 2007, we could not have enough of chemical deal news, but current economic condition, lack of visibility in the future, plunge in profits and demand, distressed credit markets are putting frigidity on M&A deals. The deal value in 2008 was down compare to 2007, only $45 billion and Akzo/ICI being $16 Billion. We are seeing many distressed deals, while some companies are forced to consider selling assets to raise needed cash such as Chemtura, or bankruptcy of Merisant. Restructuring will likely bring more assets to market and the gap between seller and buyer expectations has became more interesting/realistic as market conditions have rapidly changed (EBITDA multiples have come down by 2-4X). The slowdown in the economy and in chemical demand is expected to continue, further deteriorating company profits. The challenging economic condition may force companies to focus on the core business and perhaps selling non-core assets. There are a lot of opportunities for private equity players like Ennovance Capital that is “sector focused, operation oriented” (Scratching beneath the surface is a good way to find good opportunities). In current depressed lending markets, Ennovance is very active in sourcing/closing and willing to be flexible with transaction structures and overcome credit shortfalls. On the other hand, most traditional PE firms are on the sideline because of their inability to understand the business operation and inaccessibility of easy credit.

Similar to other historic down cycles (stronger companies are beating the weaker competitions), we expect more consolidations, portfolio adjustments and change of ownerships in chemical industry. Sub-sectors like pharmaceuticals, petrochemicals, agrochemicals (… just a few to name) are expected to consolidate further! M&A strategies for this down cycle are critical to improve scale or cost position, provide technology, or open access to new or emerging markets, or conversion of business model as well as to implement divestitures of businesses that drag on performance. This cycle offers a great opportunity for entrepreneurial and capable operating executives who pose the nerve to invest their own money and fortitude to collaborate with others to access additional/required capitals.
While the total number (and total value) of chemical transactions are expected to be low in 2009, the deal activities are expected to pick up in coming quarters (… fire-sale if economy continue to deteriorate).

I believe, there has not been a better time (at least in the past 10+ yrs) for bargain hunters to make acquisitions! Do we have the will-power to cease the moment?