The world has been changing, especially in the chemical industry. With the development of technology, new products and processes, new regulations and even new companies, the future chemical industry will be a very different place.
As SAP CEO Bill McDermott pointed out at the recent sapphire now meeting, “the pace of change has never been so fast – and it will never be so slow.”
A major impact on the change of the chemical industry is in the field of M & A. Where ICI, Allied Chemical, AkzoNobel and Agfa once stood, corteva, nouryon and covestro now stand.
With the impact of these changes on the strategy of chemical enterprises, experts spend a lot of time and energy to predict future mergers and acquisitions. Given that the value of chemical industry mergers is more than $200 billion a year, the time and effort are worth spending.
So what are the chemical industry analysts’ forecasts for 2019?
Deloitte’s 2019 global chemical industry M & A and acquisitions outlook points out that “compared with the period 2015-2016 Private equity investors saw a decline in trading volume in 2017. ” Although the volume of transactions continued to decline in 2018, the value of these transactions increased significantly due to the acquisition of Akzo Nobel by Carlyle Group and GIC. As a result, delloitte predicts, “private equity will continue to play a role in the M & a market in 2019.” If valuations are still high, private equity will continue to work with other bidders to make rolling acquisitions or reinforcement acquisitions. ”
The results were highlighted in a December 2018 report by ey’s chemical industry adviser, saying “the growing influence of private capital is creating new possibilities for trading.” Activists and private equity groups have raised record amounts of money, which means competition for direct acquisitions will be more intense. As a result, we expect more innovative financing partnerships between private investment groups and enterprises in the coming year, especially in asset divestiture. It also means more big deals. 2018 was the largest year on record, with $5 billion and $10 billion respectively. We expect this trend to continue as the market corrects and private equity firms seek to allocate capital.
Their view of this trend is based on their research. The study found that 74% of U.S. executives believe the U.S. M & a market is improving. In addition, 51% of executives expect acquisitions next year.
This anticipated surge in activity may partly offset the slight calm experienced by many chemical industries in 2018.
One of the slower performing sectors in 2018 was agricultural M & A, with Deloitte reporting that “M & A activity in the industry was mainly driven by portfolio restructuring resulting from large deals in previous years.” This means smaller, more precise initiatives, such as divestiture of product lines. “Trade disputes, especially between China and the United States, have had a negative impact on agricultural prices,” he added
Based on this, Deloitte predicts that “given these challenges facing the industry, M & A activities in 2019 are likely to continue to target a smaller and more concentrated Portfolio Rebalancing.” Big deals of the size of 2015 and 2016 are unlikely. Economic activity in 2019 and beyond is likely to favor fertilizers over pesticides, and the major rebalancing and integration in this area is nearing the end. ”
Similarly, trading activity in the commodity chemical sector is also relatively slow, “measured by trading volume, trading activity in 2018 It’s down 10% from 2017, and the volume in 2017 is the highest since 2010. ”
This is due to new restrictions on foreign capital by the Chinese government and the overall slowdown in the Chinese economy.
Another area where deals are down is in the intermediate products and specialty chemicals sector, “number of M & A transactions For the second year in a row In other words, “despite the decline in the number of transactions, the value of transactions in the industry has risen to its highest level since 2014.” This is partly due to five deals worth more than $1 billion, including the $12.5 billion acquisition by Carlyle and Singapore Government Investment Corporation of nouryon, AkzoNobel’s specialty chemicals business, and the $7.1 billion acquisition of Frutarom industries by IFF.
2018 was also a quiet year for the industrial gas industry, with the exception of two big deals after the merger of Praxair and Linde.
On the whole, Deloitte expects to see “… In 2019, despite the reduction in M & A activity in many industries in 2018 and economic uncertainty at the global level (trade stress, brexit, China’s economic slowdown, and interest rate rise)” Strong M & a market in global chemical industry “. In particular, as, “past experience shows that mergers and acquisitions in the chemical industry can flourish even in uncertain times.”
