Distinguishing Chemical Transaction Advisors And Their Value

Chemical transaction advisors come in two basic breeds. The ones that work for specialist chemicals advisory firms, who usually have a background in some specific field within the sector and have built their career on being an expert, and the ones that work for a generalist bank, who were put into a chemicals team by their employer based on less strict criteria and who developed the majority of their expertise, often all of it, after that moment they joined the chemicals team based solely on the deals-advisory side. This isn't to say that the team members for the generalist bank aren't individually skilled and knowledgeable, just that the majority of their numbers isn't pulled from the chemicals sector itself but rather from recent graduates or other generalist iBanks.

This is fine in some sectors, but it usually makes the services that a generalist bank can offers buyers and sellers in the chemicals market subpar when considered in a vacuum. In the context of a larger company that has divisions in many sectors and an ongoing relationship with the large bank, or one that immediately needs decent, but not incredibly exact, advice, the generalist bank obviously has an edge. But the rest of the time, specialized chemical transaction advisors will be better equipped to assist on buy- and sell-side deals because they will produce more accurate valuations and more likely predictions about market trends.

The value of this extra insight is never more prominent than in the current market. Though the chemicals sector and M&A activity therein are clearly healthy and continuing on the road to recovery, changes in the structure of several sub-sectors of the global chemical market that stem from restructuring during the economic slowdown have decreased the strength of the effect identified by the adage "a rising tide raises all ships." Global players from previously developing markets in South America and Asia are not only changing their relative position as far as buyers and sellers are concerned, but also using cash from their better-than-average performance during the slowdown to make significant acquisitions in the United States, Europe, and the Middle East.

Chemicals firms that see a window of opportunities to make smart moves before the sector overheats may want to move quickly to take advantage of the breathing room they created with recent restructuring, but they will need the experience of advisors that already know about the assists, technology, supply chains, and other related facts of these up-and-coming entities as well as the important details in developed markets.

Navigating this shifting landscape without the right chemical transaction advisors would be similar to leading the first oversea expeditions from Europe to the "New World" in the 15th Century, when imperfect information was better than no information but often spelled doom nonetheless.

Three particular recent trends in chemicals M&A deals highlight the types of changes that make the extra experience of specialist advisors so important. First, a large portion of deals are originating from within the industry, as opposed to from finance. Second, more deals than usual involve divisional takeovers that allow both parties to be able to focus more on the markets and parts of the supply chain that fit their growth strategy. And third, Chinese buyers are increasing their reach across the globe, whether from the private or the government-owned sector. This means that firms that have assets to offload will need to shop them around to this new type of buyer, and knowing which ones have cash on hand and what their growth strategies mean as far as their acquisition targets will be important to get the right value.

The simple truth is that chemicals advisory from less experienced chemical transaction advisors will almost always be a sub-par product, and the more dynamic the environment, the more difficult those advisors will find it to pinpoint the most important data. Some companies will be able to capitalize on other benefits associated with sub-optimal deals advised by generalist banks, but for the rest, specialized firms M&A advisory firms will be the best investment.

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