Chemical industry sees $184 billion decline in M&A value after reduction of mega deals
While the global chemical industry saw robust levels of merger and acquisition (M&A) activity in 2017, value languished well below the total seen in 2016. Overall there were 637 deals in the segment of note last year, a fall of 13, however, due to fewer ‘mega deals’ occurring, the drop in value was disproportionately greater – reducing by over $180 billion.
Like the wider M&A segment, the chemical industry has seen heightened activity over the past three years. The latest figures for M&A in the chemicals sector were recently released by Deloitte in its ‘2018 Global chemical industry mergers and acquisitions outlook’. The report covers the previous year, as well as expectations for the year to come.
The figures highlight that volume has been relatively stable over the past decade, with deal-counts at between 500 and 700 over the period. Following a peak in 2011, of almost 650, deal count fell back to around 520 in 2013. Over the period, deal value, was, meanwhile, more stable at around $50 billion in 2011 and around $35 billion in 2013.
2014, reflecting wider growth in interest in the M&A market, saw the start of rapid growth in deal value – topping around $74 billion that year. The year following, deal value jumped to $150 billion, while in 2016 – the top of the most recent value peak – total value hit $231 billion, largely on the back of $182 billion in mega-deals.
2017 was more reserved, and only one chemical deal in 2017 exceeded $5 billion, as compared to five such deals in 2016. While deal volume was steady at 637, value plummeted to $46.4 billion. While the steep decline of $185.5 billion in value can mostly be attributed to an absence of mega-deals, however, 2017 also saw largely high-valuation, which could inhibit M&A activity going into 2018.
The study also found that the global chemical M&A activity of the private equity market has been relatively stable in terms of volume over the past decade, with the past seven years noted for deal volumes of between 50 and 70. Value saw more fluctuation, with a recent high point in 2012 of around $10 billion, falling the following year to around $3.5 billion. The low point in 2016, of $3 billion saw an almost doubling last year to just under $6 billion.
Regional activity
The US continues to be the main locality for deal activity, with around 200 deals over the past four years. However, China has become increasingly active, with deal activity spiking to almost 100 from close to 50 between 2010 and 2013. The UK has remained relatively stable at around 40 deals per year over the period 2010-17, with Germany too relatively stable over the most recent period.
The study shows that the commodities segment has continued to reign supreme in terms of volume, with 387 deals recorded in 2017, the highest recorded level over the past eight recorded years. Industrial gasses recorded the second lowest volume over the recorded period, at 10 deals, while diversified recorded the lowest number of deals, at 3 (from 9 the year previous).
The firm writing regarding the trend into this year, “Global chemical mergers and acquisitions activity in 2018 is expected to remain strong, as high valuations continue to be mitigated by improving global economic conditions, continued inexpensive financing, and an appetite among industry participants for growth and transformative M&A transactions.”
