Merger and acquisition (M&A) activity in the global chemicals industry jumped significantly in the first quarter of 2011, when compared to the same period of 2010, according to the first quarter 2011 edition of Chemical compounds, a quarterly analysis of M&A activity in the global chemicals industry by PwC US. For deals over $50 million, there were 31 deals worth $41 billion in the first quarter of 2011, compared to 21 transactions totaling $23 billion in the first quarter of 2010, a 48 percent increase in volume and 78 percent increase in value. In total, the first quarter saw 293 announced deals compared to 274 deals in the same period of 2010, approximately a 7 percent increase in volume.

The first quarter of 2011 saw eight deals valued at more than $1 billion, already matching more than half the number of total large deals in all of 2010 and leading by one more large deal compared to all of 2009 large deals.

"The higher level of deal activity can be attributed to stronger balance sheets, healthier margins and positive forecasts from a range of businesses across the globe," said Tracey Stover, global chemicals leader for PwC. "During the economic downturn, the majority of deals in the pipeline were small to mid-sized deals by strategic buyers, but as we came out of the downturn, we saw a shift toward a higher number of larger deals and a wider variety of bidders. As the global economy and fundamental demand for chemicals continues, we expect a high level of deal activity will continue, making 2011 a very strong year for M&A in the global chemicals industry."

The first three months of 2011 recorded a higher level of financial investor deal activity when compared to the same period of 2010, according to PwC. Financial investors accounted for $9.2 billion, or 23 percent of total deal value in the first quarter of 2011, compared to just 11 percent in the first quarter of 2010. PwC also noted that since certain acquirers may be part of an existing financial investor portfolio, deal activity by financial sponsors is typically understated.

"Deal activity by financial investors in 2010 was partially driven by bankruptcy emergence creditor transactions. In 2011, we expect to see more financial investor activity on both the buy side and sell side as lending conditions continue to improve and private dealmakers look to divest investments they were holding during the economic downturn," added Stover.

Geographically, North America led first quarter deal activity by value with 12 transactions worth $50 million or more, comprised of six in-market deals, three inbound deals, and three outbound deals totaling $21.1 billion. The Asia-Pacific region led in volume, with 17 deals worth $10.6 billion..

China continued to show strong activity with approximately $6 billion in deals of all sizes, including $3.8 billion worth of outbound deals and $1.9 billion in local deals. The level of first quarter deal activity in China was up moderately in volume as compared with 2010 on an annualized basis, and up considerably in value for outbound deals, a trend PwC expects to see increasing in 2011..

"During the downturn, much of the deal activity focused on deals 'closer to home,' and now with the global economic landscape improving, we're seeing an increase in the level of deal activity focused on strengthening the global footprint through cross-border deals," added PwC's Stover. "China, as well as emerging market dealmakers, are expected to play an even greater role in activity this year, which could significantly increase the level of competitive bidding. With global economic conditions improving and companies and financial investors feeling more confident, the competitive landscape for deals is accelerating, and companies are advised to be well-prepared in their diligence to be able to move quickly with limited information."