Mergers & Acquisitions The New Chemical World Order: 2016 Will become s All-Time Record Year for M&A
The takeover race is on – and not about to slow down, recent studies indicate. Markets experts predict a year of record M&A that will chance the industry as we know it. The well filled war chest of emerging economies will put enormous pressure on established industry players, challenging the chemical conglomerate model…
Chicago, Illinois/USA – Global chemical M&A deal values rose by 30% last year to $110 billion, a fourth straight annual increase, laying the ground for an all-time record spike in 2016 according to the fifth edition of A.T. Kearney’s Chemicals Executive M&A Report. The M&A wave comes at the onset of a new era for chemical conglomerates, with diversified chemical companies questioning the value of the traditional diversification model and pursuing more distinct business models, the report said.
The biggest chemicals deal in 2015 was Merck’s $17 billion acquisition of Sigma-Aldrich - the largest completed deal since 2009 - followed by Chem China’s $9 billion acquisition of Pirelli. With two mega-deals already announced - Dow Chemical and DuPont’s $130 billion merger and Chem China’s $43 billion bid for Syngenta – and large new transactions likely from emerging market players, total chemical M&A values for 2016 could be double last year’s level, the A.T. Kearney report said.
Endgame for Agrochemicals
“Driven by the endgame in agrochemicals, 2016 will be the biggest year ever for chemicals M&A, including the largest deal ever in the industry, Dow and DuPont’s planned $130 billion merger” said Joachim von Hoyningen-Huene, Partner, Europe, Middle East, and Africa, A.T. Kearney.
“Emerging market players are looking for critical know-how and growth opportunities outside their home markets, and Chem China’s announced bid for Syngenta will not be the last emerging market headline deal of 2016,” von Hoyningen-Huene added.
Challenging the Chemical Conglomerate Model
Chemicals companies are increasingly seeking to restructure their portfolios In line with agendas of shareholders and activists.
The Dow Chemical/DuPont deal, for example, will restructure the company to form three core business areas in agriculture, material science and specialty products. Commodity oriented players will focus on feedstock and asset scale while specialized players will focus on solution businesses and digital business models.