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Private Placements in the European Chemicals Industry

  • ID: 3517284
  • Report
  • December 2015
  • Region: Europe
  • 105 Pages
  • Frost & Sullivan
European Chemicals Manufacturers Struggling to Cope With New Challenges and Attract Investors
The study provides an insight into the private placement transactions that have taken place in the European chemicals industry between 1st January 2010 and 30th September 2015. Sectors and regions that have received the maximum number and the highest value of private placements have been highlighted. Furthermore, analysis by type of private placements transactions (private, equity, venture capital, and private investment in public equity or PIPEs) is presented under separate sections. Insights and remarks are provided into what strategies chemical manufacturers in Europe can undertake to cope with prevailing industry challenges and attract private investors.

Executive Summary

- The trends in the European chemicals industry have been closely tied to economic cycles, as most of its segments cater to major end markets such as construction and automotive that are relatively mature in their industry life cycle.

- Private placement activity in the European chemicals industry picked up after the global financial crisis in 2008, when the economy showed gradual signs of recovery, especially in key industries such as construction and automotive. This spurred the demand for chemicals used in these recovering end markets and, in turn, boosted the performance of chemicals manufacturers. With better performance came more investments from private investors. However, the impact of the Eurozone debt crisis in 2014 resulted in a sharp decline in private placements, as the industry struggled to establish sound financial results.

- European chemical companies have consistently been at the forefront of providing sustainable solutions to their end customers. This has given them an edge in bringing about superior product differentiation in global markets. Their ability to consistently release innovative products and new technologies has been a key driver for Venture Capital (VC) and Private Equity (PE) investments.

- However, the rising cost of energy, feedstocks, and labor has severely crippled the competitiveness of industry participants. This challenge was more pronounced for start-ups, and Small and Medium Enterprises (SMEs). Moreover, fierce competition from companies in the Middle East and Asia intensified the challenge, as they had easier access to low-cost energy and feedstocks.

- During recessionary periods, private placement deal volumes received support mainly from VC transactions. VC investors were looking to invest in chemical companies that showed substantial scope in commercializing innovative products and new technology. However, X% of all VC transactions were valued at less than $X million, which is indicative of the investment in many small initiatives that aim at bringing about innovative products and new technology.

- Start-ups and SMEs struggle to raise funds from capital markets to finance their Research and Development (R&D) for innovative products and new technology initiatives. Therefore, their reliance on VC and PE funding is more significant given the need to preserve Europe’s competitive edge in product differentiation.

- The most popular industry subsegments that were targeted include plastic and synthetic resins, industrial inorganic chemicals, polymers, industrial coatings, paints, varnishes and lacquers, and adhesives and sealants. The larger scope for differentiation through product innovation and advanced technology has been the key reason for attracting more private placement volumes.
Note: Product cover images may vary from those shown
1. Executive Summary

2. Key Terms and Definitions

3. Introduction

4. Industry Overview

5. Private Equity

6. Venture Capital

7. Private Investment in Public Equity

8. Conclusion
Note: Product cover images may vary from those shown