BASF's strategy of maintaining stability in chaos

On June 23, BASF announced that it would acquire a small chemical company, Cognis, in an attempt to alleviate the company's losses caused by the endless economic shock

the sharp fluctuation of order quantity is enough to cause the collapse of most enterprises in the world, which is common for the chemical industry

with the outbreak of the economic crisis in 2008, the demand for basic chemical raw materials for all products, from coatings to plastic bags, plummeted. The profits of BASF, the world's largest chemical company, decreased by at least 50% with the sharp decline in sales and selling prices. After the "tsunami", although the company's product prices have risen, the excess production usually caused by expanding production will eventually form the dilemma of oversupply in the market

on June 23, BASF announced that it would acquire Cognis, a small chemical company, in an attempt to mitigate the company's losses caused by the endless economic turmoil

dilemma

in recent years, BASF has a better ability to deal with turbulence than most other enterprises. Among them, enterprise scale plays a vital role: within a year, the company stipulates that some large factories must be shut down for several months so that workers can disassemble the machines for necessary repair and maintenance; In addition, the competitive advantage of product diversification makes the company more stable in price positioning; In this way, Erb said that this process is simple and safe. On the other hand, it helps BASF completely reduce costs and win from the source

while summarizing its advantages, BASF also faces many practical constraints: as we all know, the company has developed rapidly in developing countries in recent years, but it still has a huge industrial chain in developed countries, where the wage cost of employees is high and the problem of aging is prominent. The most serious is the rising expectation of shareholders for investment income. For those Middle East enterprises that rely on state support, their investment is to increase employment opportunities and bring economic diversification, rather than simply pursue economic benefits. The result is serious overcapacity and manufacturers' profits are damaged

considering the four split and five split factors of these samples, BASF has tried to reduce its dependence on bulk chemical products for some time. They plan to operate chemical products with higher profits, relatively stable demand and stronger professionalism. However, changing the direction of products is very important, and a little carelessness will lead to great disaster. British ICI company was once a comprehensive chemical giant with the same scale as BASF. Previously, ICI had to disappear in the market in the form of an independent company whose revitalization of the real economy is the foundation of a powerful country due to the splitting of too many subsidiaries. At the same time, some of BASF's competitors have launched businesses such as drugs and health care services at this stage

on June 23, BASF announced that it would acquire Cognis, a small chemical company, in an attempt to mitigate the company's losses caused by the endless economic turmoil

merger and integration

after all, there are a few winners, and few are as successful as BASF

BASF has proved to the world its "expertise" in reducing costs after annexing smaller competitors. In 2009, the company acquired a specialized company called Ciba. Although there were many expenses in the process, by expanding the scale, the company had a set of new businesses for producing coatings and purifying water, with high profit points. Now it seems that the money is well spent

now, BASF hopes to succeed again through the acquisition of Cognis. Cognis is a small company whose products are used in cosmetics, food additives and household cleaning products. These products have higher profits than most bulk chemical products and stable demand. Even at the bottom of last year's recession, Cognis was able to generate higher cash returns and repay debt

the total value of the transaction is € 3.1 billion, or $3.8 billion, of which only $700 million is the acquisition price, and the rest is the debt capital to be borne by BASF. As with Ciba, some people in the company complained that the purchase price was too high. Although Moody's acknowledges that Cognis has no problem raising funds and is making profits, the acquisition is likely to affect BASF's credit rating. Of course, some people believe that this is an attractive deal in the long run - this plan will help BASF become the world's largest supplier with rapid growth and high-speed access to the trade barrier market

in the boom period before the financial crisis, when chemical giants like BASF planned to split their subsidiaries, sell or list them, and even become the prey of private equity, the company's decision-makers reacted quickly and attacked decisively, so as to escape the "temptation" of holding huge low interest funds. Private equity shareholders of Cognis have been trying to sell their shares since 2005, but their plans have been weakened by the long-term downturn in the stock market. Nowadays, it is difficult to find a large amount of idle funds in the market, and multinational consortia with all kinds of cash become the largest acquirer at this time

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