The latest global chemical industry mergers and acquisitions report by Kearney points out that the 2017 global chemical industry mergers and acquisitions will be highly innovative, promoting the chemical industry's upgrading and overall transformation.
Data show that the global chemical industry in 2017 total potential transactions more than 300 billion U.S. dollars, including four unsuccessful large transactions, accounting for 75% of the total.
The four single bulk deals (Dow Chemical and DuPont merger, Bayer and Monsanto, the Chinese chemical group, have applied for the acquisition of first-rate, Praxair and Linde, with the above four transactions valued at between $400 and $70 billion, averaging 2-3 times higher than a single transaction in the past 10 years.
The global chemical mergers and acquisitions fell for the first time since 2012 last year, less than the 2015 global chemical-industry deal, as regulatory scrutiny has tightened and some big deals have had to be postponed in 2016.
Emerging markets, especially China's mergers and acquisitions activities
The regional investment pattern has changed the chemical industry merger and acquisition activity, and this trend will become more and more obvious. Historically, U.S. and European acquirers have dominated chemical mergers and acquisitions in the world, and China's current share of global chemical mergers and acquisitions has risen steadily, becoming the world's largest cross-border trading country, accounting for 24% of global chemical mergers and acquisitions.
"This phenomenon shows that emerging markets are constantly exploring the path of globalisation, entering new markets and expanding, and looking for advanced technology and application trends." "We anticipate that this trend will continue because Chinese chemicals," said Lu Haowen Thomasluedi, a partner in the Asia-Pacific chemical and energy industry. The consolidation of supply industries, such as coal and steel, is creating larger and more competitive local giants, which will then seek an international strategy based on mergers and acquisitions to achieve globalisation, build global supply chains and accelerate the development of Chinese market operations. ”
Mergers and acquisitions to professional single business model transformation
"These big deals reflect the gradual restructuring of diversified chemical companies to a more professional single business model," he said. The shift comes as investors have sharply increased valuations for the chemical companies, on the other hand, because companies want to increase market coverage, improve capacity and efficiency, says Li Jian, a global partner at Kearney.
"In the various value chains, many chemical enterprises are promoting portfolio concentration to challenge the traditional diversified integrated business model." This trend is seen in the merger of DuPont by Dow Chemical Inc. (the two companies merged into three professional sectors). In addition, PPG's plan to acquire AkzoNobel has proved to be a strong leader in the use of mergers and acquisitions to change the value chain pattern and accelerate the transition to a specialized business model, Li Jian added.
Major driving and hindering factors in future mergers and acquisitions
It is understood that more than 80% of chemical industry executives believe that the main driving factor in promoting the continued strength of international mergers and acquisitions is the acquisition of advanced technologies or technology. By contrast, 37% of executives believe that economic volatility is the biggest potential factor hindering the further growth of mergers and acquisitions.
"Political turmoil, such as the UK's European and American elections, has further increased the uncertainty of the market, making it difficult for chemical companies to predict the changes in the business environment over the next one to two years." Despite these uncertainties, economic fundamentals will still support the continued strength of the chemical industry in the next one years, leading to further integration of the chemical industry chain, Shideri, president of the Greater China region of Kearney.
2016 mergers and acquisitions
According to statistics, the global chemical industry in 2016 a total of 17 transactions in the scale of more than 1 billion U.S. dollars, most of the transactions from the petrochemical sector and basic chemicals. Of the 10 largest deals, US companies dominate, with 5 acquirers and 6 companies from the United States.
The common motivations of trading include industrial integration, product mix reorganization, asset reorganization and so on. The number of major transactions to expand specialty chemicals has declined compared with 2015, but is still a major contributor to trade.
It is expected that the volume of trade in fine chemicals and specialty chemicals will rise substantially in 2017, following a number of major deals to be completed.