Opportunities for small chemical firms

THE economic doom and gloom is offering small chemical firms excellent opportunities to pick up a bargain and boost their presence in the sector.

Global chemicals groups and large private equity houses are increasingly selling off non-core divisions in a bid to raise funds and reduce debt.

Constantine Biller, senior analyst with Clearwater Corporate Finance in Manchester, says: “Whilst the overall volume of mergers and acquisitions has dropped significantly in the past year, there are now ideal buying opportunities for small and medium-sized groups looking to broaden their geographic coverage.

“Often these groups are run much more conservatively than the big multi-nationals and have cash reserves and the ability to move swiftly when suitable businesses come on to the market. Many have kept their powder dry over the boom years and now see real opportunities to acquire fringe assets from the global players, and add crucial new product lines or penetrate new distribution channels.

Mr Biller added that opportunities are also ideal for so-called industrial investors. These specialist ‘buy-and-build’ groups are often run by chemicals industry executives with private equity experience.

He says: “They are keen to take inefficient companies off the hands of the major groups as they have a better understanding of industry than traditional private equity players and have cash resources that allow them to move swiftly.

“In the current environment these industrial investors offer a quick and easy disposal route for larger groups, allowing them to avoid complex and often damaging auction processes.”