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As the current global chemical market has matured in the United States and Europe, western producers have begun to enter the Asian market to consolidate their position, and some Asian companies have also possessed strong competitive strengths. After being surveyed and analyzed by 329 publicly traded chemical companies, Celerant, the world’s leading management consulting company, expects that chemical mergers and acquisitions in the next 10 years will take place mainly in Asia. Manufacturers from all over the world will target this cake.
U.S. and European growth opportunities are no longer difficult
In recent years, chemical companies in Europe and North America have experienced long-term growth driven by strong demand and prices. However, it is no longer easy to look for growth opportunities in these two mature markets nowadays, and the growth that can be obtained through mergers and acquisitions is also very limited.
Corle Linden, former president of Celanese Chemical Company and current consultant of Celerant Company, said: “In the 1980s, the sale of Western-made chemicals to the rapidly growing Asian market was an opportunity that everyone was eager to grasp; the 1990s The focus of attention has shifted to the acquisition of basic chemicals and intermediates from the Asian market for use in Western production; in the early 21st century, Western participants began to import large amounts of money into Asian markets, set up production facilities in Asia, and shipped products to Around the world.†In the upcoming next phase, he believes that local producers in the West and Asia will compete to expand their capabilities in the Asian market and become truly global integrated producers.
Asian mergers and acquisitions just opened
Celerant believes that the Asian merger and acquisition situation has only just opened.
Over the past 10 years, 93% of global mergers and acquisitions have taken place in Europe and the United States. Asia's mergers and acquisitions in the past five years accounted for only 6.7% of the global total, and all of these are about to change. Glen Robinson of Celerant Consulting UK explained that in terms of market value, the Asian market is highly fragmented and is still dominated by relatively small companies. Celerant recently conducted a survey of 329 publicly traded chemical companies, including 215 Asian companies, 61 American companies, and 53 European companies. The survey shows that the market capitalization of these three regional companies is close to 280-300 billion U.S. dollars, but the average market value is very different. The average market value of Asian companies is only 1.23 billion U.S. dollars, compared with 5.06 billion U.S. dollars in the United States and 5.88 billion in Europe. Dollars. Therefore, judging from this point alone, companies in the Asian region are very attractive targets for acquisitions, especially in the current economic environment, the growth rate of Asian economies and markets is higher than that of the United States and Europe.
Robinson added that whether the Western companies want to increase their Asian market share in order to seek growth, or large Asian companies want to consolidate their position in the country, the Asian market will be an attractive target.
Celerant believes that Asian markets have become a focus of attention for most companies, but it also means more complex and unique challenges. For Western competitors, the challenge is whether mergers and acquisitions can increase their long-term profitability.
Participating in mergers and acquisitions must have "three axes"
Robinson said that compared with their peers, the companies that have the most strength to participate in Asian mergers and acquisitions must have three advantages: premium stocks, higher operational efficiency, and greater financial capacity. Such companies must exist in Asia, but few.
Celerant verified this by collecting and analyzing a variety of indicators from the investigated chemical companies. The survey shows that Asian Chemicals' valuation is 30% to 40% higher than that of US and European counterparts. For example, Asian companies have an advantage in terms of average price-to-earnings ratio, total economic value, and profit before interest, taxes, depreciation, and amortization (EBITDA), but almost all operating indicators have performed poorly.
Robinson believes that the strength of mergers and acquisitions of European and North American companies is not to be doubted, but it does not deny that Asian companies also have the advantages of cultural consistency and high quality stock value, which can all be used for leveraged buyouts. In addition, as global market growth slows down, Asian companies will focus on shifting from growth to internal operational efficiency and scale, which will also serve as a driver for mergers and acquisitions.
Surveys and studies show that there are about 20 potential acquirers in Asia that basically have these three main advantages. They represent 9.3% of the Asian market, including leading companies in Japan, China, South Korea, India, and Thailand. In addition, Russia and the Middle East also have several strong competitors in this market. In the next 10 years, Asian chemical industry mergers and acquisitions will occur frequently, because global manufacturers want to share a share in this rapidly expanding market.
Asia will become the future of chemical mergers and acquisitions
The United States and Europe giant battlefield eastward to find opportunities