2017 Global Chemical Industry M&A Outlook
Momentum continues despite global uncertainties
Global chemical mergers and acquisitions (M&A) activity is expected to increase in 2017, but geopolitical factors such as protectionism could pose a challenge to achieving the levels of record activity the industry experienced in 2015 and 2016.
The global chemical industry has experienced several years of strong M&A activity, as companies pursued growth, realigned their portfolios, and focused on core competencies. Questions abound: Have consolidation and portfolio realignment achieved their goals for the industry? Are there enough strong companies available to supply the M&A market? Will increasing interest rates begin to impact deal activity? Have valuations driven acquirers out of the market? These questions and others like them will be answered in due course in the global chemicals industry.
- In the Americas, buoyant activity in the United States M&A market is anticipated in 2017.
- While M&A activity in Brazil remains depressed, it is recovering steadily with the economy.
- Within Europe, the United Kingdom should continue to be an attractive market for both strategic and financial buyers in 2017.
- German chemical companies continue to focus on acquisitions to extend their value chains or complement technologies.
- M&A activity in Switzerland is likely to remain strong driven by global consolidation trends and the use of M&A to fill technology gaps or diversify portfolios.
- Portfolio realignment and several expected transactions are expected to keep the chemicals sector active in France.
- In Africa, the chemicals sector will likely remain influenced by global and local factors including market consolidation and investment into agricultural chemicals.
- In the Asia Pacific region, Deloitte expects both inbound and outbound mergers in China will increase in 2017.
- Due to strong economic growth in India, vibrant chemical M&A activity is anticipated.
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.”
2015 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.