Industry Spotlight: Chemicals
Published: 24-Apr- 2012 | Comments: 0
The current business environment for chemical companies remains favorable despite economic uncertainties, including those related to the European sovereign debt issues and the modest growth rates experienced in many developed countries. Restructuring efforts engaged at the start of the economic crisis—including plant closings and strict expense-control initiatives—have significantly improved many chemical organizations’ balance sheets, leaving these companies well positioned for the future.
The chemical industry continues to redefine itself with the rise of emerging economies (Asia and, more specifically, China) and the shift of commodity chemical production from high-cost manufacturing countries to the Middle East, where access to feedstock creates a strategic advantage. Many companies are investing heavily in innovation and are looking to capitalize on global megatrends, including sustainability and green chemistry, alternative energy, and access to clean water and food supplies.
2011 was a record year for mergers and acquisition (M&A) activities among chemical companies. The strong cash positions of many companies, low borrowing costs, and a push by shareholders to expand beyond organic growth have driven consolidation. According to Young & Partners, the equity value of worldwide acquisitions of chemical companies in 2011 exceeded $80 billion, the largest amount over the past decade and significantly higher than those of 2010 ($39 billion) and 2009 ($25 billion).
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