Global consultancy partnership Kearney has released today the 9th edition of its Chemicals Executive M&A Report. The report explores global M&A activity in the chemicals industry each year, analysing past activity and developing forward-looking insights from surveying chemicals executives across the globe.
Over the next 12 months, Kearney is predicting a rise in M&A activity and ESG focus following three years of steady decline. Deals value has shrunk from $333bn in 2019 to the $236bn recorded in 2021, a decrease of 29%. The transaction size has also decreased sharply, with fewer ‘mega-deals’ available. In 2019, 21% of recorded deals topped $10bn, compared to only 3% in 2021.
The sector sees room for a rebound in the next 12 months, with the value of announced deals in 2021 already up 50% on 2020. 41% of executives surveyed expected M&A activity in the sector to increase over the next 12 months, with an additional 9% predicting a strong increase, compared to only 36% who expected numbers to remain stable and just 14% predicting a decline. One reason for this optimism is the availability of capital from strategic and financial investors; another is a push from strategic investors to upgrade their portfolios to more sustainable and higher value-add materials.
The 2021 pipeline of announced deals is also well above the 2017 and 2018 results, showing a marked growth path in chemicals in 2022.
ESG will play a crucial role in the investment decisions made in 2022, with more respondents listing a ‘Strong portfolio shift toward ESG’ as important for the next 12 months than any other category (35%). 85% of executives predicted that this ESG agenda would likely include acquiring nascent technologies to enable ESG, and 75% that M&A activity will include divesting businesses unfit for ESG goals.