Private equity is playing an increasingly prominent role in the M&A arena. In the last 10 years, it has executed between US$16 billion and US$23 billion in transactions each year in the chemical industry, accounting for 23% of total transaction value on average over the entire period.
Proving to be highly effective players in the industry, private equity groups frequently buy assets from chemical companies, increase their value over a few years and sell them for substantially more. And quite often, these groups will sell at higher multiples compared to chemical company sellers. (See Figure 3) This suggests that chemical companies may be missing out on higher multiples because they are foregoing opportunities to restructure and optimize businesses before selling them.
Figure 3: Private equity vs. chemical company multiples in M&A