International players are big on the mergers and acquisitions scene this year — and in certain plastics sectors, that's likely to pick up, in part spurred by the weak U.S. dollar.
Several analysts who follow plastics transactions noted increases in the number of M&A deals in the first half of 2008 vs. the same period in 2007.
U.S. buyers acquiring foreign plastics firms decreased — 19 deals in 2008 compared with 21 in 2007. Foreign buyers were more active — 12 transactions in 2008 as opposed to nine in 2007, said John Hart, director of P&M Corporate Finance LLC's plastics and packaging group in Southfield, Mich.
Cross-border plastics deals where foreign buyers gobbled up U.S. firms increased in all sectors except specialty markets, sheet extrusion and blow molding, Hart said in a telephone interview. But he expects U.S. buyers to be on the move during the second half of the year.
The largest sector in the first half of both years was film, which represented more than 30 percent of total transactions. U.S. buyers outnumbered foreign buyers 2-to-1 in both periods, he said.
``With the U.S. markets being down, U.S. companies are looking to follow their customers and looking to gain in those developing markets,'' Hart said said.
In a telephone interview, Tom Blaige, president of Blaige & Co. in Chicago, said film and sheet should end this year with a 72 percent increase in M&A activity, driven by a wave of cross-border deals. Raw materials and compounding also should experience strategic cross-border transactions by companies focused on vertical integration and geographic expansion, according to Blaige.
Blaige predicts pipe, profile and tube extrusion M&As will increase by nearly 60 percent, driven primarily by cross-border sales of privately held niche companies.
PVC and specialty chemicals maker Mexichem SAB de CV of Mexico City completed four transactions in Latin America in the sector during the first half of 2008, followed by Moline, Ill.-based Deere & Co.'s two deals in the United States and Israel that made it the world's third-largest irrigation company.
``M&A has never been a real factor before in Latin America,'' Blaige said. ``You've got a lot of companies that are competing in a globalized marketplace and they're seeing the need to get bigger.''
As for Deere & Co., ``this irrigation thing has popped up as a consolidation ploy,'' he said.
International buyers have been behind 14 percent of all M&A deals in North America in the first half of 2008, said Bill Ridenour, owner of Polymer Transaction Advisors Inc of Newbury, Ohio.
``We had expected a higher level of completions from the [Europeans], who have a huge bid advantage of a 57 percent euro/dollar premium,'' Ridenour said in an e-mail.
Ridenour said he also expects international buyer activity to pick up in the second half of 2008, as foreign buyers become more aggressive in North America.