Acquisition Wave in the Fine Chemicals Industry (A)

Case Solution

Laurence Capron, Andrew Horncastle

Most M&A cases focus on the value of a single transaction (synergies, price, integration issues). In the case series “Acquisition Wave in Fine Chemicals” we took a different perspective. Our goal is to describe how managers’ decisions to make an acquisition and determine the purchase price are likely to be influenced by merger activity in your industry and the actions of your competitors. Driven by shareholder pressure to focus their portfolios, major fine and specialty chemicals companies such as Degussa, Clariant and Rhodia completed a large fine chemicals acquisition in 2000 and paid too much. This subsequently led to falling share prices and financial turmoil. The fact that the other companies have overpaid despite publicly available signals from exchanges indicating overpayment and the nature of the chemical industry and management are clear indicators of irrational herd behavior.

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