Management consultancy Kearney has released a new report, Chemicals M&A: Deal Activity Remains Sluggish but Rebound Signs Are There, which discusses industry trends and makes predictions for mergers and acquisitions (M&A) activity in the chemicals sector for the coming year. 

"Pressure is mounting for the chemicals M&A market to open up," noted Andrew Walberer, Kearney partner and co-author of the 2024 Chemicals Executive M&A Report. "We expect small to mid-size deals to predominate in the near future, rather than the mega deals we've seen in the past. Europe will remain a challenging place for outsiders to make M&A deals right now, with the Ukraine-driven decline in foreign investments there. Across the board, deals will continue to be expensive, since multiples continue to be relatively high."

This 10^th edition of the Chemicals Executive M&A Report explores the various factors leading to expectations of an increase in M&A activity in the next 12 to 18 months, including 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 in the space. The 2024 Chemicals Executive M&A Report offers recommendations for chemicals companies as well as a forecast for likely deal activity.

The report looks at the various factors contributing to an expected rebound in M&A activity in the chemicals sector after a five-year downward trajectory, including:

• Strong optimism (51%) among executives that M&A activity will increase
• Chemicals companies standing at or below five-year historic valuations
• New opportunities created by major chemicals players' plans to restructure in coming months
• Analysis of last year's top deals, driven by consolidation, scale, and vertical integration
• Fundamental shifts in the industry, such as: sustainability-related pressure from government policies and shareholders; expansion of new sustainable, carbon footprint-reducing products; and a shift to innovative, customer-facing models in recycling, renewables, and specialty
• Regulations and growing demand for sustainable products as significant deal driver

"For M&A in the chemicals space, it's been a year of comeback from geopolitical pressures, high interest rates, and the resulting hold on many companies' decarbonization plans," said Kearney partner and report-co-author Sudeep Maheshwari. "Decarbonization goals should reappear strongly in the coming year. Chemical executives we spoke with expect strategic investors such as national oil companies (NOCs) to move faster in deal-making than PE investors, with high interest rates precipitating an increase in divestments and asset carve-outs."

To find more information about the 2024 Chemicals Executive M&A Report, click here. To learn more about Kearney, please visit www.kearney.com.