Opportunities: Chemicals Mergers & Acquisitions for Big Players or Small Players?

By | September 25, 2012

There’s a lot of buzz about Mergers & Acquisitions in the Stock Markets of the world! However, for the average investor, they can represent both a buying opportunity; and a selling opportunity. The challenge is knowing the difference, as the history of the New York Stock Exchange is littered with the carcuses of mergers that failed, and few can point to successful mergers in the short term.

Mergers and acquisitions (M&A) are something of an advanced topic for the typical individual investor — making drilling down to focus on M&As in just one market sector even more daunting. But if you like the idea of adding a little geek cred to your investing knowledge or just want to learn about an area that poses some extra challenges, then boning up on single-sector M&A may be just your thing.

The Chemicals Industry: Not Exempt from M&A frenzy!

And in that case, why not center your attention on the chemicals industry? It’s actually not that easy to find extensive or detailed coverage of M&A prospects and deals-in-progress in chemicals.

Sure, pretty much all of the major market-analysis providers offer a little coverage of the sector. It seems typical that they’ll have one or two chemicals specialists on staff, but rarely are chemicals and materials actually a major focus for the firm as a whole. Which is why it intrigued me when I stumbled upon the Valence Group’s site.




Valence Group: M&A chemical advisors

The Valence Group describes itself as the biggest team of professionals wholly-dedicated to chemical m&a advisory services in the world. It may say a lot about demand for such expertise that I wasn’t able to find mention anywhere of another similarly dedicated firm.

Nevertheless, on first glance, you would think that this would make Valence Group, and hopefully their site, the place to find some great information on up-and-coming or at least possible M&A deals. But as it turned out, that wasn’t particularly the case.

Yes, Valence Group has a few pages dedicated to doing glossy deals that they have been a part of in the past. I also got to read up on their corporate philosophy and was impressed at how internally team-oriented they say that they are.

Great Resumes: Hot Tips?

Still, none of that was anywhere near as impressive as the presence of some Morningstar or TABB Group–style analysis would have been. Thoughts on hot takeover prospects, perhaps, or on which chemicals-sector companies have cash reserves they’re just dying to use to buy out a foreign concern — say, one that’ll give them a toehold into an international market they’d be hard-pressed to find entry into otherwise?

But there was no research like that available, although you can download in PDF form a couple issues of Valence Group’s newsletters. (More on that newsletter in a bit.) After all, as I further learned from perusing the site, unlike TABB or Morningstar, Valence Group is not an independent analyst, despite the fact that they actually have put together their own index, fully viewable on their site, of chemicals industry stocks.

Valence Group: Investment Bank

Valence Group is actually a specialized investment bank, which means that all their materials and even those polished-looking newsletters are all designed specifically to get you lusting after the idea of doing some chemicals-sector M&A (and perhaps part of the reason they do not publish their reports…?)

In fact, the primary content of those newsletters were reports indicating what, you guessed it, the climate for M&As in Valence Group’s industry is like and how continues to look very positive.

For the Individual Investor

Probably the most useful item on their Website to an average individual investor is the list of factors in a chemical-sector M&A that Valence Group considers themselves especially well suited to advise any potential M&A participants in; and when I say useful”, what I mean there is that you could find it educational to read through that page, just to understand what specialty issues might be at hand as part of any deals in this industry.

And their newsletters are certainly worth the free download, if for nothing else than the comparison bar charts they offer about current growth in various chemicals subsectors. So overall, I’d say that if I was looking for M&A investing advice and mainly interested in chemicals, I would look over Valence Group’s site…and keep going.

Investment Analysis

I think an individual investor can do better by looking for specific information on companies that might be involved in an M&A already. Valence Group isn’t offering any insider scoops on their site, and in fact their newsletters each offer the disclaimer, again, that what they offer is not independent investment analysis.

Still, since Valence Group’s site did get me thinking about the sector, reading up on what’s been said about M&A potential in chemicals right now certainly convinced me that chemical-company deals might be worth paying attention to. For example, as it turns out (and I independently confirmed with further research myself), 2011 was a record-breaking year for chemical sector-specific M&A, with total value of deals being made at $82 billion worldwide.

And, 2012 doesn’t necessarily show signs of weakening prospects there. So don’t be afraid to consider teaching yourself more about M&A in general, nor about M&A specifically in chemicals. Just don’t expect, as an average investor, that the Valence Group or their Website is going to be useful as a primary or even sole secondary information source.

Amy Marre