2016 Global chemical industry mergers and acquisitions outlook
A quest for focus
Global chemical mergers and acquisitions (M&A) activity is expected to remain buoyant in 2016, building on the strong momentum experienced in 2015, with continued portfolio realignment and consolidation plays in various segments.
Global chemical mergers and acquisitions (M&A) activity is expected to remain buoyant in 2016, building on the strong momentum experienced in 2015, with continued portfolio realignment and consolidation plays in various segments. Companies have an increased focus on developing their core strengths and are looking to acquisitions to deliver growth and greater shareholder value.
In 2016, key chemical segments of fertilizers and agriculture chemicals, diversified, and industrial gases are all likely to experience an uptick in M&A transactions. Higher deal volumes are likely as companies use M&A as a tactic to deliver growth to counter challenging business conditions, which are expected to continue in these segments. Moving into 2016, these segments may also see transformational moves, especially after current portfolio adjustments and spin-offs underway are completed. Additionally, competitive pressure to build scale within all segments may drive further activity.
Other trends driving the increasing portfolio change are tax-free spin-offs and divestitures, as companies position themselves for innovation and growth. “The spin-off momentum is likely to continue in 2016, given the often low tax basis in legacy businesses, resulting in tax-free spins delivering greater shareholder value than straight dispositions,” says Duane Dickson, Deloitte Global Leader, Chemicals & Specialty Materials Sector. “Digital design and Advanced Manufacturing open up new frontiers for materials innovation and potentially threaten historical volumes in some commodities.”