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Acquisition wave in the fine chemicals industry (A, B and C)

Author: Capron, Laurence INSEAD Area: StrategyPublisher: Fontainebleau : INSEAD, 2006.Language: EnglishDescription: 23 p. + 9 p. + 7 p.Type of document: INSEAD CaseNote: Latest version available via https://publishing.insead.eduAbstract: Most cases on MandAs focus on the value of an individual deal (synergies, price, integration issues). In the case series "Acquisition Wave in the Fine Chemicals Industry", we take another perspective. We aim to describe how managers' decisions to make an acquisition and to determine the acquisition price are likely to be influenced by the merger activity in their industry and their competitors' actions. Driven by shareholder pressure to focus their portfolios, leading specialty and fine chemicals players such as Degussa, Clariant and Rhodia entered into major fine chemicals acquisition in 2000 and overpaid. Subsequently, this led to decreasing stock prices and financial turmoil. The fact that the other firms overpaid, despite publicly available signals from stock markets indicating the overpayment, and the nature of the chemicals industry and management, are clear indicators for irrational herd behavior. Pedagogical Objectives: This case allows MBA students and executives to analyze a series of deals in 2000 by comparing transaction multiples, average premiums paid and acquirer stock price changes. The discussion of the case will ultimately lead to why the managers overpaid and what role irrational aspects and herd behavior can play in MandA transactions. This case can be used at an early stage of the course to illustrate how a deal takes place within an acquisition wave, when competitors' actions are likely to influence both the decisions to make an acquisition and to determine the acquisition price. Alternatively, it can be used at the end of the course to illustrate irrational aspects and herd behavior associated with MandAs.
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Latest version available via <a href=https://publishing.insead.edu>https://publishing.insead.edu</a>

This case allows MBA students and executives to analyze a series of deals in 2000 by comparing transaction multiples, average premiums paid and acquirer stock price changes. The discussion of the case will ultimately lead to why the managers overpaid and what role irrational aspects and herd behavior can play in MandA transactions.
This case can be used at an early stage of the course to illustrate how a deal takes place within an acquisition wave, when competitors' actions are likely to influence both the decisions to make an acquisition and to determine the acquisition price. Alternatively, it can be used at the end of the course to illustrate irrational aspects and herd behavior associated with MandAs.

Most cases on MandAs focus on the value of an individual deal (synergies, price, integration issues). In the case series "Acquisition Wave in the Fine Chemicals Industry", we take another perspective. We aim to describe how managers' decisions to make an acquisition and to determine the acquisition price are likely to be influenced by the merger activity in their industry and their competitors' actions.
Driven by shareholder pressure to focus their portfolios, leading specialty and fine chemicals players such as Degussa, Clariant and Rhodia entered into major fine chemicals acquisition in 2000 and overpaid. Subsequently, this led to decreasing stock prices and financial turmoil. The fact that the other firms overpaid, despite publicly available signals from stock markets indicating the overpayment, and the nature of the chemicals industry and management, are clear indicators for irrational herd behavior.

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