According to the latest “Global Chemical Industry M&A Report” released by Kearney, global industrial M&A activities will reach a new high in 2017, promoting the overall transformation and upgrading of the chemical industry. .
In 2017, the total potential transaction volume of the global chemical industry exceeded US$300 billion, of which there were 4 uncompleted large transactions, accounting for 75% of the total.
In these 4 large transactions (Dow Chemical-DuPont, Bayer-Monsanto, China National Chemical Corporation-Syngenta, Praxair-Linde), each The valuation of each transaction is between US$40 billion and US$70 billion, which is 2-3 times that of any single transaction in the past 10 years.
Due to increasingly strict scrutiny by regulatory authorities, some very large M&A transactions had to be postponed in 2016. Therefore, the total number of global chemical M&A transactions last year fell for the first time since 2012, falling below Global chemical industry M&A transaction volume in 2015.
Emerging markets, especially China, are experiencing rapid growth in M&A activity
Regional investment patterns have changed M&A activity in the chemical industry, and this trend will become increasingly apparent. Historically, US and European acquirers have dominated chemical M&A, but now China’s share of global chemical M&A activity has steadily increased, becoming the world’s largest initiator of cross-border transactions, accounting for 24% of global chemical M&A transactions. %.
“This phenomenon shows that emerging markets are constantly exploring globalization paths, entering new markets and expanding, and seeking advanced technologies and applications.” Kearney Company Thomas Luedi, partner and Asia Pacific chemicals and energy industry leader, said, “We expect this trend to continue as the consolidation of China’s supply industries such as chemicals, coal and steel continues to create larger and larger More competitive local enterprise giants, these enterprises will then pursue international development strategies based on mergers and acquisitions, thereby globalizing their businesses, building a global supply chain, and accelerating the development of business in the Chinese market.”
Transformation of mergers and acquisitions into a professional and single business model
“These large transactions reflect that diversified chemical companies will gradually adjust their asset structure and transform into a more professional and single business model. On the one hand, this change occurs because investors The substantial increase in the valuation of such chemical companies is partly because companies want to increase market coverage, improve production capacity and efficiency,” said Li Jian, global partner at Kearney.
“Across each value chain, many chemical companies are increasing the focus of their asset portfolios to challenge the traditional diversified integrated business model. This trend has begun with The Dow Chemical Company This can be seen in the merger of DuPont (the two companies split their business into three professional segments after the merger). In addition, PPG’s plan to acquire AkzoNobel is also a strong proof that leading chemical companies use mergers and acquisitions to change the value chain pattern and accelerate their Transformation of professional business model,” Li Jian added.
Main driving and hindering factors for future mergers and acquisitions
It is understood that more than 80% of chemical industry executives believe that the main driving factor for the continued strong momentum of international mergers and acquisitions is the acquisition of advanced technology or application technology. In contrast, 37% of executives believe economic volatility is the biggest potential factor hindering further growth in M&A.
“Political turbulent factors such as Brexit and the US election have further increased market uncertainty, making it difficult for chemical companies to predict changes in the business environment in the next one to two years. “Despite these uncertainties, economic fundamentals will still support the continued strong momentum of mergers and acquisitions in the chemical industry in the coming year, promoting further integration of more chemical industry chains,” concluded Shi Derui, President of Kearney Greater China.
Mergers and Acquisitions in 2016
According to statistics, there were 17 transactions in the global chemical industry in 2016 exceeding US$1 billion, with most transactions coming from the petrochemical and basic chemicals fields. U.S. companies dominate 5 of the 10 largest dealsAmong the acquirers, 6 target companies are from the United States.
Common motivations for transactions include industrial integration, product portfolio restructuring, asset restructuring, etc. Compared with 2015, the number of major transactions to expand the specialty chemicals business has decreased, but it is still the main factor driving transactions.
In 2017, in view of the many large-scale transactions that are about to take place, it is expected that the proportion of transaction value in the field of specialty chemicals and fine chemicals will increase significantly.
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