Global chemical mergers and acquisitions (M&A) activity is expected to increase in 2017, but geopolitical factors such as protectionism could pose a challenge to achieving the levels of record activity the industry experienced in 2015 and 2016, according to Deloitte’s “2017 Global chemical industry mergers and acquisitions outlook.”
Higher levels of cash on corporate balance sheets, low levels of innovation and a low growth macroeconomic outlook are expected to help drive M&A volumes. Depressed natural gas and oil prices should also help drive activity in the petrochemical M&A space, according to Deloitte. Meanwhile, the fertilizer and agriculture chemicals, industrial gases and diversified chemical segments are expected to experience strong M&A activity in pursuit of scale and to gain access to different technologies.
Mega deals valued at over $1 billion have become more common with 41 deals taking place over the past three years, compared to 30 deals between 2011 and 2013. It is expected that 2017 M&A activity will be focused around innovation and digitization, according to Deloitte. As valuations have soared, companies may rely on sales growth and synergy capture to help mitigate the higher cost of deals.
“Companies are increasingly focused on gaining access to technological capabilities and are creating corporate venture capital divisions to help support new investments,” says Duane Dickson, vice chairman, Deloitte LLP and U.S. chemicals and specialty materials sector leader. “Increased digitization around the world is also expected to encourage M&A activity. We expect to see these global trends lead to increased growth and deal flow in the chemicals industry.”
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