Notes from M&A East, October 12 & 13, 2010
Spent a couple of days at the M&A East conference, organized by ACG of Philadelphia. Attendance was good this year, at around 1,400. Overall the mood was positive and deal activity, by anecdote, seemed to be much stronger than this time a year ago.
Tuesday kicked off with a session on globalization and outsourcing, which featured extensive discussion of China (see also previous post on Montreux). The conference's first major speaker A. G. Lafley, recently retired from P&G, followed with a fascinating description of the process by which he and Jim Kilts negotiated the sale of Gillette to P&G in a $57Bn announced January 2005. Lafley now works as an operating advisor with Clayton Dubilier and Rice, PE firm.
Wednesday’s sessions and the PE marketplace were an extremely rich networking environment. Some key takeaways included a steady recovery in debt financing availability and terms although no longer would senior lenders go to the 5 – 6 X EBITDA excesses of a couple of years ago. In addition, it seems like a 40% equity standard has emerged for PE sponsors – at least as the first ask from senior lenders. A panel comprising a chief risk officer from GE Capital and bankers from First Niagara and Sovereign Bank (a unit of Spain’s Santander), seemed quite united on that point.
The PE marketplace was crowded and it was good to see some familiar names and faces from 3i, HIG, Cleveland Capital Works, Graham Partners et al, as well as some new (to me) and interesting names like Blue Wolf and Valor Equity Partners, an original investor in Tesla Motors. After a morning of conversations with old friends and new, the conclusion was pretty clear. There’s money to invest. Also despite some setbacks and retrenchments (see D.E. Shaw’s recent travails in real estate), fundraising is back and well underway for subsequent funds.
What does this mean for the chemical industry? Like our panel said at last week’s CM&E meeting in New York, M&A activity is up and set to rise further. Money is available for good companies to refinance and for strategic acquisitions. In addition, based on my unscientific survey, many PE firms are at least familiar with, if not comfortable with the chemical sector as a good home for investment.
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