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Mergers and acquisitions in global chemicals industry to reach new highs in 2015
Continued portfolio realignment, strong corporate balance sheets, and a favorable debt market are expected to drive deal activity.
NEW YORK, 29 January 2015— 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. “While the increase in deal activity is expected to be broad based, the most robust M&A growth in 2015 is anticipated in the fertilizer and agricultural chemical segment. Companies in this segment are focused on acquiring new innovative technologies and supplementing current portfolios to deliver more holistic solutions to the market,” said Dan Schweller, Deloitte Global Manufacturing M&A Leader.
Another trend driving M&A in the chemicals industry is the focus on biotechnology and renewables. “Increasingly companies are exploring possibilities in applying biotechnology to their manufacturing processes of existing products and to the development of new products. This search for new biotechnology innovations and solutions is likely to lead to further joint venture and M&A activity in 2015,” said Duane Dickson, Deloitte Global Chemicals Sector Leader.
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.
“While the chemicals industry M&A outlook for 2015 is positive, there are potential disruptors, including the recent drop in oil prices and economic uncertainty, that could impact the current momentum,” adds Schweller. “The recent drop in oil prices may bring some uncertainty into the chemical value chain, creating more exacerbated bid-ask spreads between buyers and sellers. 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,” said Schweller.
View the report at: www.deloitte.com/chemicals
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DTTL Global Manufacturing Industry group
The DTTL Global Manufacturing Industry group is comprised of around 2,000 member firm partners and over 13,000 member firm industry professionals in over 45 countries. The group’s deep industry knowledge, service line experience, and thought leadership allows them to solve complex business issues with member firm clients in every corner of the globe. Deloitte member firms attract, develop, and retain the very best professionals and instill a set of shared values centered on integrity, value to clients, and commitment to each other and strength from diversity. Deloitte member firms provide professional services to 78 percent of the manufacturing industry companies on the Fortune Global 500®. For more information about the Global Manufacturing Industry group, please visit www.deloitte.com/manufacturing.