Chemical compounds: Large deals drive 2007 Chemical M&A activity

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An analysis of global chemical transactions
January 2006 through September 2007

Deal volume (by number of announced deals > $50 million) hasbeen consistently high through the first three quarters of 2007.At the current year-to-date pace, 2007 deal volume is likely tosurpass 2006.The strength of the first half of the year was no surprise giventhe momentum carried through from 2006. There was, however,some uncertainty for the remainder of the year created by thedebt market turmoil in the second quarter. But even during thisperiod of uncertainty, M&A activity has proven to be resilient,based on the third quarter volume as compared to 2006 andthe first half of 2007.Although the current market dynamics have not impacted the level of deal activity as much as some had anticipated, the deal processes may have been affected. It is reasonable to believe that relative bidding leverage has increased for strategic bidders as the debt market turmoil has altered the financing landscape that fueled private equity activity over the past several years. Thisdynamic may be compounded for foreign strategic bidders because of the continued weakening of the US dollar, which recently hit an all-time low against the Euro at the end of the third quarter.