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November 7, 2007

New study: Volume of 2007 chemical business deals likely to surpass 2006 levels

Three Large North American Deals Drive M&A Activity

Rebekkah Marshall

Total chemical-deal value for the first three quarters of 2007 exceeded total deal value for all of 2006 ($88 billion versus $51 billion, respectively), says a recent report from PricewaterhouseCoopers entitled Chemical Compounds. The quarterly report on the state of transactions in the global chemicals industry cites that deal volume has been consistently high through the first three quarters of 2007.  At the current year-to-date pace, 2007 deal volume is likely to surpass 2006.

“The strength of the first half of the year was no surprise given the momentum carried through from 2006,” said Tracey Stover, US chemicals leader, PricewaterhouseCoopers.  “There was, however, some uncertainty in the second quarter of 2007 created by the debt market turmoil.  But even during this period, M&A activity has proven to be resilient.”

The increase in deal value during 2007 reflects the increase in both the number and size of announced large deals (defined as greater than $1 billion) from 2006.  There were 12 large deals during the first three quarters of 2007, as compared to nine large deals during all of 2006.

During the first three quarters of 2007, three large deals were announced with deal values in excess of $10 billion.  Only one large deal with a value of greater than $10 billion was announced during 2006.

On a regional basis, North American organizations have been leading the acquisition targets on both a volume and value basis, according to the PricewaterhouseCoopers report.  This trend (49% of the total deal value and 32% of total volume) has been primarily driven by three large deals, while Western Europe has faired well in terms of deal volume.

Other regions have not performed as well.  This quarter’s report shows that deals in the Asia-Pacific region are not expected to exceed the numbers reached in 2006.  The number of deals in Asia has declined during the first three quarters of 2007, primarily driven by less deal activity in China, India and Japan.

“While we are seeing less M&A activity taking place in Asia, the region continues to attract smaller deals,” said Saverio Fato, global chemicals leader, PricewaterhouseCoopers.  “In addition, some of the North American and Western European deals have included manufacturing capacity and market positions in Asia, which will continue to drive momentum to this area.”

For more information and to access the full report, visit: www.pwc.com/chemicals

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