The Win-Win The conversation depicted above took place in the early 1980s at a dinner celebrating the closing of the sale of a commodity chemical business owned by a large chemical company seeking to focus on specialty chemicals. The buyer was a small chemical company seeking to grow in commodities via acquisition. This conversation illustrates the essential nature of almost every transaction – the sale of a business because it is worth more to the buyer than it is to the seller. Because of this, the seller and the buyer are both smiling at the closing – each side has succeeded in accomplishing their own, very different, sets of objectives. In the article that follows, we will explore some of the types of situations that can make for a successful transaction in the chemical industry – from both the seller’s and the buyer’s perspectives. Ingredients for a Successful Transaction: Some Examples Some of the best transactions in the chemical industry occur when the seller’s objectives dovetail with those of the buyer. Below are some examples of situations where each side comes out a winner: 1. What is not "core" to the seller is "core" to the buyer. Chemical companies are constantly evaluating their businesses to determine if any are not "core" to their overall strategy. This fact, coupled with the inevitable changes that take place in management over time, create numerous situations where a transaction makes sense for both sides. 2. Seller’s ownership nearing retirement or seeks liquidity. After running a successful business for many years, the owner of a privately held company may seek to retire or make his investment more liquid. A buyer is found which seeks to aggressively expand the business with a long term perspective and the financial capacity to satisfy the owner’s objectives. 3. Complementary strengths and weaknesses in technology and sales. Seller has a technically superior product line but is weak in selling. Buyer has a strong sales force but needs better performing products. 4. Manufacturing efficiencies. Seller’s plant is old and in need of significant capital to keep up and running and in compliance. Buyer has a modern plant with excess capacity. Or the opposite – where the buyer is seeking to buy or build a new facility and the seller has a good plant that the buyer can utilize. 5. Similar products but in different geographic markets. Seller has distribution channels in areas of the world where buyer has none, and vice versa. 6. Pricing improvements. Seller is the low-price competitor in the market, seeking to increase market share. Buyer competes more on performance and service rather than price. 7. Staff redundancies. Seller and Buyer have similar businesses which can be operated together with less line and/or staff personnel than exists with the businesses operating separately. 8. The beachhead acquisition. Seller has a strong business in a market where there are technical and other barriers to entry. Buyer seeks to enter this market via acquisition. For a company seeking to divest and a company seeking to acquire, finding the right match is not easy – perseverance and patience are needed. However, the steady flow of acquisitions and divestitures in the chemical industry over the years is evidence to the fact that for every company seeking to divest, a buyer exists that will provide the best fit, and for every buyer seeking an acquisition, there is a business available that is the right one for it.