According to Deloitte, mergers and acquisitions activity in 2014 for the global chemical industry will likely increase due to downstream value-added opportunities, continued strength in specialty chemicals, and portfolio realignments in North America. Growth is especially seen in the agrochemicals, bio-based/green chemicals, and health and nutrition. These findings are included in Deloitte’s 2014 Global Chemical Industry Mergers and Acquisitions Outlook.
“This year developing megatrends like expanding global middle class, population growth, and food security will influence global chemical M&A opportunities in end markets such as agrochemicals, as well as impact M&A activity in various regions,” said Dan Schweller, Deloitte Global Manufacturing M&A Leader. “Also, North America M&A activity will likely increase as chemical companies continue to pursue large structural portfolio realignments.”
Chemical companies in the United States are likely to focus their M&A efforts less on cyclical commodity platforms and more on higher growth investments that offer greater product differentiation in the global chemicals market. The Deloitte report also anticipates a continuation of large deals in the first half of 2014.
The outlook for European chemical M&A activity is unchanged as the region’s economy is stabilizing, yet still fragile. Additionally, the increased competition from Asia, as well as the low-cost production environment in the United States will continue to impact the growth prospects for many European chemical companies. Private equity will also play a role in M&A activity in the region in 2014, as well as small divestitures and bolt-on acquisitions.
Asia Pacific’s transaction activity continues to be driven by China. In 2014, M&A investments will play a prominent role in driving growth. According to the report, global chemical companies are anticipating to capitalize on new market opportunities in China for high-value applications, product lines, and technologies.
Latin America’s chemical market in 2014 will likely see further consolidation in the specialty chemical segment. The report anticipates companies to have greater focus on capturing synergies, gaining operational efficiency, and becoming more competitive in 2014.
Finally, the report predicts a mixed outlook for the chemical industry in the Middle East, but projects moderate growth overall in M&A activity.
“The global chemicals industry is primed for increased M&A activity in 2014,” says Duane Dickson, Deloitte Global Chemicals Sector Leader. “Key industry trends focused on advanced solutions, resource conservation, and environmental responsibilities are driving acquisition growth plans and divestiture activity. Expect consolidation trends to continue as companies and the industry pursue transformations to more sustainable businesses and operations.”
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© 2014 PEPD • Private Equity’s Leading News Magazine • 2-14-14