In the study, Frost has covered 30 segments and the M&As trends are classified based on time, segments, deal size, geography, type of acquirers, and integration. Furthermore, iterations such as classification based on \'time, segments, and deal size\', \'geography, time, and type of acquirers\', among others, are analyzed. The scope of this research service includes 2,436 mergers and acquisitions (M&As) over the period 2000 to May 2009. Macro-economic factors, end-user analysis, and outlook till December 2009/April 2010 are mentioned. The objective of this research service is to provide financial analysts, investment professionals, and market participants the tools and information needed to support financial analysis and investment decisions.
1. Mergers & Acquisitions in Chemicals and Materials –
Light at the End of Tunnel is NOT that of the Approaching Train
Shrikanth S.
Senior Research Analyst
Business & Financial Services
October 27, 2009
2. Focus Points
Introduction to Mergers & Acquisitions
Economic Indicators
Industrial Production
Federal Fund Rate
Crude Oil
Chemicals Index
Analysis of Trends
Analysis by Time
Trend by Integration
Analysis by Deal Volume & Average Deal Size
Analysis by Acquirer Profile
Analysis by Geography
Analysis by Segments
End Market Demand
Conclusions
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3. Focus Points
Introduction to Mergers & Acquisitions
Economic Indicators
Industrial Production
Federal Fund Rate
Crude Oil
Chemicals Index
Analysis of Trends
Analysis by Time
Trend by Integration
Analysis by Deal Volume & Average Deal Size
Analysis by Acquirer Profile
Analysis by Geography
Analysis by Segments
End Market Demand
Conclusions
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4. Economic Indicators
Industrial Production & Baltic Dry Index Fed Fund Rate & LIBOR-OIS Spread Crude Oil Price & Stock Index
110
Indexed to Jan 2008
100
90
80
70
Chemical Products Chemical Materials Basic Chemicals Organic Chemicals
Inorganic Chemicals Industrial Gases Synthetic Dyes & Pigments Paints Coatings & Adhesives
60
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09
Months
12,000
Baltic Dry Index (units)
10,000
8,000
6,000
Baltic Dry Index
4,000
2,000
Months
0
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09
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6. End Market Demand
Industrial Production & Baltic Dry Index Fed Fund Rate & LIBOR-OIS Spread Crude Oil Price & Stock Index
130
120
110
100
90
$/barrel
80
70
60
50
Crude oil price (Refiners acquisition cost - composite)
40
30
20
10
0
Jan-07
Jan-02
Jan-03
Jul-03
Jan-04
Jan-05
Jan-06
Jan-08
Jan-09
Jan-00
Jan-01
Jul-02
Jul-04
Jul-05
Jul-06
Jul-09
Jul-00
Jul-01
Jul-07
Jul-08
300 Months
Indexed to Jan 2005
250
200
150
100
50 S&P ASX 200 Materials Basic Materials S&P Chemicals
Dow Jones US Chemicals Index FTSE 350 S&P 500
Days
0
Nov 08
Nov 05
Nov 06
Nov 07
May 09
May 05
May 08
May 06
May 07
Sep 08
Sep 09
Mar 09
Sep 05
Sep 07
Sep 06
Jan 09
Mar 06
Mar 07
Mar 05
Mar 08
Jan 05
Jan 06
Jan 07
Jan 08
Jul 09
Jul 05
Jul 07
Jul 08
Jul 06
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7. Focus Points
Introduction to Mergers & Acquisitions
Economic Indicators
Industrial Production
Federal Fund Rate
Crude Oil
Chemicals Index
Analysis of Trends
Analysis by Time
Trend by Integration
Analysis by Deal Volume & Average Deal Size
Analysis by Acquirer Profile
Analysis by Geography
Analysis by Segments
End Market Demand
Conclusions
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8. Analysis of Trends
Time Integration Deal Volume & Size Acquirer Profile Geography Segment
180 1600.0
Maximum number of deals in
recessionary period, though
160 of small average deal size. 1400.0
Deals by Quarter Year over Year by Quarters
140
1200.0
Average Deal Size ($ million)
120
1000.0
100
800.0
Deals (x)
80
600.0
60
400.0
40
20 200.0
0 0.0
2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Quarter
Source: Frost & Sullivan
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9. Analysis of Trends
Time Integration Deal Volume & Size Acquirer Profile Geography Segment
400
350 Acquisitions among companies to
companies and distribution to
300 distribution has a 63.4% correlation
250
Deals
200
321
150
259 242
228 220 216
100 189 182 178
135
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 May 2009
Year
Company Company Buyback Distribution
Forward Integration Backward Integration Research & Development
Source: Frost & Sullivan
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11. Analysis of Trends - Analysis by Time
Time Integration Deal Volume & Size Acquirer Profile Geography Segment
100.0
90.0
80.0
Acquirer Profile
70.0
60.0
Increase
50.0
in strategic
40.0 M&A
30.0
20.0
10.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 May 2009
Year
Alternative Financial Investments Asset Management Banks
Brokerage Insurance Other Financials
Chemicals Construction Materials Containers & Packaging
Metals & Mining Other Materials Paper & Forest Products
Others
Source: Frost & Sullivan
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12. Analysis of Trends
Time Integration Deal Volume & Size Acquirer Profile Geography Segment
Regions 2000 2001 2002 2003 2004 2005 2006 2007 2008 May 2009
Acquiring Regions Acquisitions in Percent (%)
North America 0.6 1.0 1.4 1.0 2.4 5.4 3.6 1.8 20.3 26.2
BRICS 4.2 3.5 4.7 3.0 2.8 3.3 5.2 5.7 12.7 20.5
Asia Pacific 0.3 0.3 0.0 0.0 0.0 0.4 0.4 0.4 3.8 9.2
Northern Europe 22.3 23.2 23.6 24.0 26.0 26.6 22.7 26.9 19.6 11.3
Western Europe 38.4 43.6 46.2 41.0 48.8 41.1 42.2 43.7 25.9 13.3
Eastern Europe 14.2 9.7 7.1 8.0 6.8 8.3 9.6 5.0 3.8 1.0
Southern Europe 18.4 16.6 14.2 20.5 10.8 10.8 14.7 15.4 9.5 9.2
Rest-of-World 1.7 2.1 2.8 2.5 2.4 4.1 1.6 1.1 4.4 9.2
Target Regions Acquisitions in Percent (%)
North America 14.7 10.0 16.7 17.1 13.8 16.4 14.1 11.5 29.6 30.3
BRICS 3.9 4.8 4.8 4.5 2.0 7.4 7.3 5.8 7.5 20.5
Asia Pacific 1.7 1.0 1.9 3.5 2.0 2.5 2.8 1.4 8.8 8.7
Northern Europe 21.4 25.6 21.9 21.1 26.0 24.6 22.2 21.2 14.5 8.7
Western Europe 36.4 39.4 36.7 33.2 39.8 36.9 36.7 39.2 28.9 10.8
Eastern Europe 7.2 4.8 4.3 4.0 2.4 2.9 4.0 5.4 1.9 1.5
Southern Europe 13.3 11.8 11.4 15.1 10.6 8.6 9.7 12.2 5.0 11.3
Rest-of-World 1.4 2.4 2.4 1.5 3.3 0.8 3.2 3.2 3.8 8.2
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13. Analysis of Trends
Time Integration Deal Volume & Size Acquirer Profile Geography Segment
300 288
283
253
250 Commodity polymers, paints and coatings, 240
and pharmaceutical fine chemicals saw the
maximum acquisitions in the period 2000- 218
211
May 2009. However, during Jan-May 2009,
200 packaging and construction materials 192 197
accounted for majority of the M&As. 179
172 173
Deals (x)
156
151
150 142
126
109 114
100
84
77 79
67 71 71
60 61 64 65
51
50
34
27
8
0
WTC
PCC&HC
TA
CPC
I&C
O&MC
CM
RC
Gas
CC
L&G
API
AC&F
Cat
HPP
EC
Elas
A&S
PFE
FA
P&P
PA
F&B
P&CA
Bio
E&E
Pack
PE
EP
CP
P&C
Segments
Source: Frost & Sullivan
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14. Focus Points
Introduction to Mergers & Acquisitions
Economic Indicators
Industrial Production
Federal Fund Rate
Crude Oil
Chemicals Index
Analysis of Trends
Analysis by Time
Trend by Integration
Analysis by Deal Volume & Average Deal Size
Analysis by Acquirer Profile
Analysis by Geography
Analysis by Segments
End Market Demand
Conclusions
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15. End Market Demand
Housing Market Automotive Market & Semiconductor Market
2250
Housing Starts (in thousands)
2000 Housing Starts
1750
1500
1250
1000
750
500
250
0
Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug
00 00 00 01 01 02 02 02 03 03 04 04 05 05 05 06 06 07 07 07 08 08 09 09
Months 20.0
Growth (%)
210 Case-Shiller Price Index (Composite 20)
Year-on-Year Monthly Growth in Price 15.0
Case Shiller Index (x)
180
10.0
150
5.0
120
0.0
90
(5.0)
60 (10.0)
30 (15.0)
Months
0 (20.0)
Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar
00 00 00 01 01 02 02 02 03 03 04 04 05 05 05 06 06 07 07 07 08 08 09
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16. End Market Demand
Housing Market Automotive Market & Semiconductor Market
60,000 647 700
Bus Production (000's)`
51,034 614 677
Production (000's)
48,656 48,566 576
45,517 600
50,000
49,841
46,162 47,259 48,375 500
40,000 536
495
Every auto produced in the US 400
30,000 284 439 contains $2700 worth chemicals
300
15,442 16,045 15,756 15,432 15,374 15,679
20,000 15,932 15,488
200
10,000 100
0 0
2005 2006 2007 2008 2009 2010 2011 2012
Years
Car Production LCV Production Bus Production
250.00
Americas Japan
Market Billings ($ billion)
200.00 Europe Asia Pacific
115 124 127
51 102
87
150.00
36 46 41 61
50 46 48
100.00 46 44 49
32 35
42 38
30
31 39 40 40 41 40
50.00 32 32
27
63
46 39 31 32 39 40 45 43 39
0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Years
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17. Focus Points
Introduction to Mergers & Acquisitions
Economic Indicators
Industrial Production
Federal Fund Rate
Crude Oil
Chemicals Index
Analysis of Trends
Analysis by Time
Trend by Integration
Analysis by Deal Volume & Average Deal Size
Analysis by Acquirer Profile
Analysis by Geography
Analysis by Segments
End Market Demand
Conclusions
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18. Detailed Table of Contents
Introduction to Mergers & Acquisitions
Analysis of Trends
Analysis by Time
Trend by Integration
Analysis by Deal Volume & Average Deal Size
Analysis by Acquirer Profile
Analysis by Geography
Analysis by Segments
Economic Indicators
Global GDP Growth
Bank Lending
Consumer Confidence
US Saving Rate
Crude Oil
Baltic Dry Index
Chemicals Index
Capacity Utilization
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19. Detailed Table of Contents
End Market Demand
Autos
Housing
Semiconductors
Oil Rigs
Conclusions
Concluding Thoughts
About Frost & Sullivan
N68F-F1 19
20. Next Steps
Register for the next Chairman’s Series on Growth:
The Growth Excellence Model: Competitive Benchmarking & Growth
Investing (November 3, 2009) (http://www.frost.com/growth)
Register for Frost & Sullivan’s Growth Opportunity Newsletter and
keep abreast of innovative growth opportunities
(www.frost.com/news)
N68F-F1 20
21. For Additional Information
Johanna Haynes Lori Salazar-Malone
Corporate Communications North American Sales Director
(210) 247-3870 Business & Financial Services
johanna.haynes@frost.com (210) 247-2448
lsalazar-malone@frost.com
Andrew Calvert Jennifer O’Grady
Vice President Research Director
Business and Financial Services Business & Financial Services
44 (0)20 7343 8373 (214) 887-1818
andrew.calvert@frost.com jogrady@frost.com
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