Chemicals sector M&As to rise over next year to 18 months, predict industry execs

A newly released report predicts a resurgence in mergers and acquisitions (M&A) activity in the chemicals sector over the next year to 18 months.

Global management consultancy, Kearney’s report titled Chemicals M&A: Deal Activity Remains Sluggish but Rebound Signs are There, showcases a variety of factors contributing to an anticipated increase in M&A activity after a five-year downward trend.

More than half of the industry executives surveyed for the report (51 per cent) expressed optimism about an uptick in M&A activity.

Key drivers include growing public concern and heightened environmental awareness, stricter regulatory environments, particularly in Europe, and historic levels of dry powder held by private equity (PE) investors.

Key global and regional insights

Global market trends: Downstream derivatives and specialities are experiencing growth globally due to lower cyclicality and higher margins, though this segment remains underdeveloped in the Middle East.

Regional dynamics: Middle Eastern chemical companies are beginning to leverage M&A for growth in specialities and conversion segments. Major players like Aramco and ADNOC are making strategic investments to capture a larger share of the global market.

Valuation trends: Many chemical companies are valued at or below their five-year historic levels, creating opportunities for acquisitions.
Strategic investments: National oil companies (NOCs) are expected to lead deal-making activities over PE investors, influenced by high interest rates driving divestments and asset carve-outs.

Sustainability pressures: Government policies and shareholder demands for sustainable products are significant drivers of M&A activity. The sector is shifting towards sustainable, innovative, and customer-facing models in recycling, renewables, and speciality chemicals.

Top deals and restructuring: Analysis of the previous year’s top deals shows a focus on consolidation, scale, and vertical integration. Major chemical companies are planning restructures that will create new M&A opportunities.

Region’s chemicals sector at a “pivotal’ juncture

Jose Alberich, partner, Middle East and Africa at Kearney, noted, “The Middle East’s chemicals sector is at a pivotal juncture, with clear targets and a focus shift towards downstream integration and value-added segments. Recent deals by major players like Aramco and ADNOC underscore the region’s commitment to leveraging M&A as a key growth lever.”

Sudeep Maheshwari, Kearney partner and co-author of the report, added, “For M&A in the chemicals space, it’s been a year of a comeback from geopolitical pressures and high interest rates. We expect decarbonisation goals to re-emerge strongly, with strategic investors moving faster in deal-making than PE investors.”