A.T. Kearney Predicts All-Time Record Year for Chemicals M&A

DUBAI / Emirates Business

Global chemical M&A deal values rose by 30% last year to $110 billion, a fourth straight annual increase, laying the ground for an all-time record spike in 2016 according to the fifth edition of A.T. Kearney’s Chemicals Executive M&A Report.
The report provides an outlook for Chemicals M&A and analyses the progress of chemical M&A activity over the last decade. In the last 10 years Egypt, Saudi Arabia, Kuwait, and the United Arab Emirates have been prominent Chemicals M&A players in the region. Despite this, deal activity in the Middle East and Africa was small compared to global figures with an approximate total deal value of US$ 1 billion.
Richard Forrest, Lead Partner of A.T. Kearney’s Global Energy Practice said: “The continued depressed oil price is a challenge for chemicals companies in the Middle East, their profitability and global competitiveness. Growth of regional chemicals companies is more likely at this point in time to be organic than through mergers and acquisitions. Regional M&A activity is going to be very selective and will focus on opportunities in familiar value chains where scale or critical skills may be acquired at a favourable price as a result of global chemicals conglomerates divesting non-core assets.”
Globally the M&A wave comes at the onset of a new era for chemical conglomerates, with diversified chemical companies questioning the value of the traditional diversification model and pursuing more distinct business models, the report said.
The biggest chemicals deal in 2015 was Merck’s $17 billion acquisition of Sigma-Aldrich – the largest completed deal since 2009 – followed by ChemChina’s $9 billion acquisition of Pirelli.
With two mega-deals already announced – Dow Chemical and DuPont’s $130 billion merger and ChemChina’s $43 billion bid for Syngenta – and large new transactions likely from emerging market players, total chemical M&A values for 2016 could be double last year’s level, the A.T. Kearney report said.
“Driven by the endgame in agrochemicals, 2016 will be the biggest year ever for chemicals M&A, including the largest deal ever in the industry, Dow and DuPont’s planned $130 billion merger” said Joachim von Hoyningen-Huene, Partner, Europe, Middle East, and Africa, A.T. Kearney.
“Emerging market players are looking for critical know-how and growth opportunities outside their home markets, and ChemChina’s announced bid for Syngenta will not be the last emerging market headline deal of 2016,” von Hoyningen-Huene added.