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Medium M&A Valuation Synergies

Chemical Consolidation

#Industrials / Chemical #Industrials #Chemical
ProHub Comment

This is a classic M&A case testing both valuation skills and strategic thinking. The candidate must understand synergy identification (cost and revenue), apply valuation multiples from peer data, and recognize integration risks in a consolidating industry. The case structure progresses logically from financial analysis to synergy identification to risk assessment.

Estimated Time 15 minutes
Difficulty Medium
Source NYU
50 / 100
Dowling Chemical Company, headquartered in Michigan, one of the largest global chemical companies in the world that specializes in plastics with $20bn in sales, is considering a merger with industry rival Chem-X, headquartered in Louisiana, who also specializes in plastics with $10bn in sales. The management team of Dowling has retained your firm to provide a recommendation on whether or not to proceed with the merger and assess the risk/rewards of the recommended path forward.

Clarifying Information

  1. Plastic is each company’s only product
  2. Plastic is a commodity product with no differentiation
  3. Both operate mainly in the US and sell to the same set of customers (packaging companies etc)
  4. The Chem-X team will likely run the combined company
  5. Plastics industry is consolidated with 4 main producers accounting for 90% of market share (including both Dowling and Chem-X, who each have 25% share).