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Portfolio restructuring made for a hot climate for chemical deals in North America in 2014, and the trend will continue this year, according to an analysis and survey by the management consulting firm A.T. Kearney.
The number of chemical businesses changing hands in North America shot up 24% to 279 last year. Global deal activity, on the other hand, dipped 2% to 1,035 compared with 2013. Deal value grew by 16% in North America compared with 13% worldwide.
“Focus on the core business is a key driver … as strategic owners work to restructure their portfolios and acquire complementary targets while activist investors push for increased corporate transparency and focus,” says Andrew Walberer, an A.T. Kearney partner.
Notable 2014 deals include Ashland’s sale of its water technologies business to the private equity firm Clayton, Dubilier & Rice for $1.8 billion and CF Industries’ sale of its phosphate fertilizer business to rival Mosaic for $1.4 billion. Eastman Chemical snapped up Taminco, an amines and crop protection chemicals firm, for $2.8 billion.
Financial investors were involved in just under 20% of deals last year, a level that has prevailed since 2009. But 50% of private equity acquisitions were of specialty chemicals firms, compared with only one-third in 2012.
In a survey about 2015 trends, A.T. Kearney found that 82% of chemical executives expect divestitures due to portfolio-refocusing actions will be the most important factor. In addition, activist investors are expected to turn their attention to Europe’s underperforming chemical firms.
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