Dominating the Moderate M&A Scene in the Chemical Industry: What's Cooking by 2025?
Insights from Swa Frankfurt
Domestic Acquired Chemical
The chemical industry has faced a challenging market landscape, resulting in a somewhat subdued M&A appetite in 2024. departure from the megadeal Covestro, the transactions have mainly consisted of smaller scale deals and few cross-border purchases. However, the industry's transformation and consolidation pressures promise a surge in M&A activity by 2025.
Global Growth Hurdles
The chemical industry suffered worldwide in 2024 due to weak economic development. Europe, in particular, contended with high energy costs that negatively impacted profitability and aggravated the competitive landscape in various cyclical industry segments.
What's Ahead?
Upcoming M&A activity will likely be characterized by several key factors:
- Market Consolidation: Historically, M&A in the chemical industry has been fueled by the desire for market consolidation and strategic growth. Given the current fragmented global market, companies will likely pursue acquisitions to bolster their market positions and expand into new territories[1].
- Economic Stability: As economic conditions stabilize, with inflationary pressures easing and interest rates becoming more stable, companies may gain increased confidence in engaging in larger and more strategic transactions[2].
- Opportunistic Acquisitions: Shareholder willingness to sell, particularly in family-owned businesses, may lead to opportunistic acquisitions. This trend could persist as companies capitalize on available targets[1].
- Entry into Emerging Markets: M&A plays a crucial role in gaining entry into emerging markets, which is a crucial long-term growth strategy in regions where demand for chemical products is on the rise[1].
Expected Transactions
- increased deal volume in subsectors: related sectors like plastics are experiencing an upsurge in deal volume. This trend may extend to the chemicals sector, particularly in areas such as specialty chemicals[2].
- Consolidation among mid-sized players: as large companies spearhead M&A, mid-sized players may become more active, either by acquiring smaller firms or being acquired themselves. This could lead to an increase in transactions within the sector[1].
- Strategic Acquisitions: M&A is frequently utilized by chemical distribution companies to secure strategic market positions. Expect companies to pursue transactions that strengthen their supply chains or product portfolios[1].
In conclusion, the anticipated rise in M&A activity by 2025 is driven by the need for market consolidation, strategic growth opportunities, and favorable economic conditions. The chemical industry may witness strategic acquisitions that fortify market positions and facilitate entry into emerging markets.
[1] Data from various industry reports and analysts' opinions.[2] Information derived from economic forecasts and market trends.
- The chemical industry, in the wake of consolidation pressures, may see an increase in M&A activity by 2025, driven by the desire for market consolidation and strategic growth.
- The surge in M&A transactions could involve companies bolstering their market positions and expanding into new territories through acquisitions, as suggested by trends seen in subsectors like plastics and specialty chemicals.
- As economic conditions stabilize, large companies' increased confidence in engaging in larger and more strategic transactions could lead to an uptick in M&A activity, potentially resulting in mergers among mid-sized players.
- Opportunistic acquisitions in family-owned businesses may persist, with companies capitalizing on available targets in a bid to enter emerging markets, a crucial long-term growth strategy for the chemical industry.
