Chemical Industry Survey Chemical Industry Executives Expect Global M&A to Increase
Despite lingering uncertainty about Europe’s recovery and global GDP growth, more than 50 percent of executives surveyed at leading chemicals industry players and investment banks expect M&A activity to increase globally in 2014.
Munich/Germany - The survey, conducted as part of A.T. Kearney’s second annual “Chemicals Executive M&A Report” shows growth in chemicals M&A activity will be driven by the high liquidity of chemicals companies, resurgence of the U.S. chemicals industry because of low-cost feedstock, regional expansion plans of Asian companies pursuing growth through acquisitions in Western economies, and Western companies seeking access to developing markets. The report includes an analysis of global chemicals sector M&A deals in 2013 and a forward view of expected 2014 sector M&A activity.
“Consolidations are expected to account for the largest share of all transactions, due to the still highly fragmented Asian markets and to Western chemical companies focusing their M&A activities on strengthening their core businesses, ” said Joachim von Hoyningen-Huene, A.T. Kearney partner and author of the study.
2013 M&A Analysis
The analysis shows that 2013 M&A deal activity recovered slightly compared to low levels in 2012. Deal activity was driven by strategic investors’ strong balance sheets, significant funds available to private equity, and the low cost of debt.
The value of deals in 2013 increased sharply by 47 percent, mainly due to a rise in large transactions with private equity participation. Private equity company share of chemicals transactions stayed at almost 20 percent from a volume standpoint, but value rose from 22 percent to 32 percent in 2013.
Companies in the specialties and fine chemicals sector are the most sought-after acquisition targets. Between 2001 and 2013 the share in deal volume remained relatively constant across all chemicals industry sectors. In terms of value, the share of specialty and fine chemicals deals rose by more than $7 billion since 2001, equaling a CAGR of almost 8 percent.