Is the chemical M&A race overrated? A recent study shows that managers identify digitalization and sustainability as the most important drivers of growth - while doubting the benefits of M&A.
Basel/Switzerland – The majority chemical managers expect their business to grow in the Europe region over the next five years. At the same time, however, satisfaction with site conditions in Germany has fallen dramatically compared to the previous year, with a decline of more than 20%.
The German chemical industry sees digitalization and sustainability as the most important drivers of growth. By contrast, M&A is not considered a guarantee for growth. These are the results of a recent trend study from the consulting specialist Camelot Management Consultants.
The German chemical industry estimates that economic development in Europe will be positive over the next five years. However, the results also reflect uncertainty: Compared to 90% in October 2016, only 68% of the participants rated the site conditions in Germany as “good” or “very good”. Commenting on the results of the latest survey, Dr. Josef Packowski, Managing Partner at Camelot, said that: “The significant decline in site satisfaction is a reaction to the obvious pent-up demand for digitalization in Germany, in addition to increasing bottlenecks in logistics and transport infrastructure; in light of the positive growth prospects in Europe, this dissatisfaction will intensify.”
Digitalization and Sustainability as Growth Drivers
The chemical industry is currently facing a fourth industrial revolution. This is also reflected in the opinion of the panel: 76% of surveyed managers see digitalization as “very important” for the growth and competitiveness of both their own company and the entire chemical industry. However, Dr. Sven Mandewirth, partner and chemical expert at Camelot warns that: “Digitalization and automation are recognized as significant competitive factors in the chemical industry, but are often not yet implemented. In many cases, the realization does not go beyond intermittent flagship projects.” A similarly important driver of growth for companies (68%) and industry (78%) is sustainability. On the other hand, the survey participants attach less importance to the circular economy.
Asked about the drivers of organic growth, the surveyed chemical managers cite “new products” (50%), “new integrated customer solutions and services” (34%), and “improved processes through digitalization and automation” (28%). When it comes to the growth-enhancing effect of mergers and acquisitions (M&A), which can currently be seen very strongly in the chemical industry, the sector is astonishingly split: 65% of those surveyed believe that M&A improves their competitive position and leads to more growth. However, 60% believe that transactions are increasingly focused on short-term financial performance and unsustainable growth strategies.
Outdated IT and Cumbersome Organization Inhibit Growth
Asked about internal growth hurdles, the chemical managers attribute an “outdated IT system landscape” to be the strongest growth-inhibiting effect. A “sluggish business organization with long decision-making processes” is considered to be equally severe. In third place with 25% are “limited production capacity” and “lacking investment funds”. In terms of external growth hurdles, the study participants cite “rising energy and raw material costs” (65%),“lack of qualified personnel” (57%) and “EU regulatory requirements” (54%).