Chemical Industry M&A Rebound Coming Soon

A new report by Kearney, 2024 Chemicals Executive M&A, reveals that deal activity remains sluggish but rebound signs are there. The report reveals industry trends and makes predictions for mergers and acquisitions (M&A) activity in the chemicals sector for the coming year.

In 2023, global chemicals M&A saw deal value fall 4% from 2022 levels. While it was a small drop for the year, deal value has been on a generally steep decline since 2019, plunging 59%. New deals announced in 2021, along with some economic recovery, fueled a deal increase that year, but the sector lost steam again when unforeseen factors, including elevated interest rates, recession fears, and geopolitical conflicts, turned deal-makers cautious again in 2022 and 2023. Increased operational costs, the impact of the conflict in Ukraine on global supply chains, and prolonged COVID lockdowns in China further affected the industry and dampened M&A activity.

“Pressure is mounting for the chemicals M&A market to open up,” said Andrew Walberer, Kearney partner and co-author of the 2024 Chemicals Executive M&A Report. “We expect small to mid-size deals to predominate in the near future, rather than the mega deals we’ve seen in the past. Europe will remain a challenging place for outsiders to make M&A deals right now, with the Ukraine-driven decline in foreign investments there. Across the board, deals will continue to be expensive, since multiples continue to be relatively high.”

Kearney, a global management consultancy, interviewed 100+ leaders in the chemicals industry in the second half of 2023. This 10th edition of the Chemicals Executive M&A Report explores the various factors leading to expectations of an increase in M&A activity in the next 12 to 18 months — including growing public concern and heightened environmental awareness, stricter regulatory environments, particularly in Europe, and historic levels of dry powder held by private equity (PE) investors in the space. The report offers recommendations for chemicals companies as well as a forecast for likely deal activity.

The chemical report looks at the various factors contributing to an expected rebound in M&A activity in the chemicals sector after a five-year downward trajectory, including:

“For M&A in the chemicals space, it’s been a year of comeback from geopolitical pressures, high interest rates, and the resulting hold on many companies’ decarbonization plans,” said Kearney partner and report-co-author Sudeep Maheshwari. “Decarbonization goals should reappear strongly in the coming year. Chemical executives we spoke with expect strategic investors such as national oil companies (NOCs) to move faster in deal-making than PE investors, with high interest rates precipitating an increase in divestments and asset carve-outs.”

Find the full Chemicals Executive M&A Report here.