2015 Global chemical industry mergers and acquisitions outlook

Executive summary

Global chemical mergers and acquisitions (M&A) activity is expected to increase further in 2015, building on a strong year of activity in 2014 that saw 635 M&A transactions with an aggregate value of US$77.8 billion. According to the Deloitte Touche Tohmatsu Limited (Deloitte Global) Manufacturing Industry group’s 2015 Global chemical industry mergers and acquisitions outlook, companies are continuing to realign portfolios and pursue profitable inorganic growth opportunities. In addition, M&A interest is likely to be fueled by stronger corporate balance sheets, liquid debt markets, and continued favorable interest rates.

During 2015, key chemical segments of commodities, intermediates and specialties, fertilizers and agriculture chemicals, and industrial gases are all likely to experience continued growth in M&A activity. Another trend driving M&A in the chemicals industry is the focus on biotechnology and renewables.

In the Americas region, the continued economic growth in the United States (U.S.) is expected to help facilitate more transactions in 2015. Additionally, low feedstock and energy costs in the U.S. are likely to attract foreign buyers, however, the recent appreciation of the U.S. dollar could impact affordability to foreign buyers. Also, the recent fall in oil prices could alter the feedstock advantage enjoyed by U.S. based assets. With the economic uncertainty in Brazil, M&A activity is likely to occur at a mild pace.

Within Europe, the UK and Germany saw smaller and medium sized transactions in 2014, and that trend will continue in 2015. In Germany, some of the more significant market players have implemented new organizational structures which are expected to drive M&A activity in 2015. In the UK, one of the few economic bright-spots in Europe, increased deal activity is expected to be prompted by further economic recovery and greater involvement by both private equity investors, as well as larger private and public companies seeking growth.

In the Asia-Pacific region, China is expected to be very active in the agricultural chemicals segment due to the continued need to increase crop production. Japan will likely see growth in M&A within the fine and life science chemicals segments as companies continue to diversify away from lower margin commoditized chemical products. Meanwhile in India, an increase in chemical M&A activity is anticipated, especially from foreign buyers.

There are potential disruptors, including the recent drop in oil prices and economic uncertainty that could impact the current momentum. Additionally, recent economic news out of certain countries and key emerging markets calls into the question the strength of the world economy. However, despite these potential disruptors, chemical M&A activity is fully expected to continue its growth in 2015 – the momentum continues.