The Valence Group Global Chemicals M&A Conference
Wednesday, 14 September 2016 | High valuations, ‘Synergised’ multiples a challenge for M&A – AkzoNobel | Joe Chang | ICIS Chemical News
NEW YORK (ICIS)–One of the major challenges in today’s mergers and acquisitions (M&A) market is high valuations, a senior executive at coatings company AkzoNobel said on Wednesday.
“Today we see these high valuations and ‘synergised’ multiples because the regular multiples are so high – up to 15x. But if you pay such as high price, many things need to go right,” said Floris van Hall, director of M&A at AkzoNobel.
Van Hall spoke at The Valence Group Chemicals M&A Conference in New York.
“Today you have to make sure the synergies are rock solid, and have stress testing for different scenarios,” he added.
AkzoNobel is focusing on bolt-on acquisitions, a classic case being its buyout of BASF’s coil coatings business announced in February 2016. The deal is expected to close before the end of 2016.
“This is a classic case for synergies from bolt-ons. We are seeking to move around 80% of BASF’s coil coatings production into our existing facilities,” said van Hall.
A major competitive advantage for an acquiring company is fast decision making, said van Hall.
For AkzoNobel, only two approvals are needed – one at the beginning of the deal and one at the end. In the meantime, it is led by a steering committee which could include the chief financial officer (CFO) for larger deals, he noted.
Knowing your advisors – from bankers to lawyers to environmental experts is also a key aspect that can facilitate fast decision making, he said.
“Some say you should change up advisors for deals just to keep them on their feet. But if you’ve done three deals with one advisor, the fourth will be that much smoother,” said van Hall.