"Mid market" characteristics determine the merger and acquisition boom in the fine chemical industry

Mergers and acquisitions in the fine chemical industry have increased significantly since the beginning of 2005. This trend continues until 2007, when it continues to enjoy a strong momentum of development. From 2000 to 2004, there were approximately 5 fine mergers and acquisitions in the field of fine chemicals each year. In early 2005, the merger and acquisition of fine chemicals increased threefold.
Through analysis of the data, it has been found that private equity companies have greatly increased their interest in the merger and acquisition of fine chemicals. And, for the first time, India’s fine chemical manufacturers bought Western companies.
The fine chemical industry is an intermediate market industry. The fine chemicals market is divided into two parts: the internal market for its own consumption and the outsourcing market. The internal market is difficult to quantify, but it is predicted that its scale and market value are twice that of the external market, and most market resources are forecasted worldwide. The market demand for fine chemicals in the outsourcing market ranges from US$250 to US$30 billion, of which two-thirds are produced by factories. In the past 5 to 10 years, pharmaceutical companies have had business outsourcing trends. This phenomenon greatly contributes to the growth of the outsourcing market.
Structurally speaking, the fine chemicals industry is highly branched and contains medium-sized and small enterprises. There are 500 to 600 fine chemical producers, of which only about 10 to 12 fine chemical producers have sales revenue of more than 250 million U.S. dollars. . Most of the fine chemicals producers have sales revenue of less than 100 million U.S. dollars and are privately owned.
Through data analysis, it can be found that private equity companies have completed almost one-third of the fine chemical mergers and acquisitions. From the standpoint of private equity, the fact that the fine chemical industry is an intermediate market industry is very clear, because the middle market is usually a hot spot for business mergers and acquisitions. In the past 24 to 36 months, the debt caused by the acquisition has also increased. An active debt market is also an important reason why private equity companies have become active business buyers. In all intermediate market sectors, private equity companies are increasingly acquiring business activities, not just in the fine chemicals industry.
In all intermediate market sectors, the average purchase price multiplier paid by private equity companies reached 8.1 times in 2006, a substantial increase from 5.9 times in 2001. Moreover, from the current perspective, there has been no sign of any decline. However, some market analysts predict that the fine chemical mergers and acquisitions market will begin to cool in 2007 or early 2008.

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