As I listen to corporate executives from the major adhesive and sealant companies describe the business environment during recent earnings calls and investor conferences, the consensus is clear: It’s been quite a year. Executives describe 2025 with words like “highly dynamic,” “unprecedented,” and “volatile.” Nearly every earnings call begins with a cautious note about market uncertainty and constrained demand, with one CEO characterizing customers’ posture as “wait and see” in the months following the April 2 “Liberation Day” tariff announcement. It hasn’t been all bad though, and sentiment is improving. But business leaders are undeniably eager for a return to some sense of normalcy. The big question is, will “normal” ever come back?

When you think about it, “unprecedented” is an apt term to describe not just 2025, but the last few years overall. Since the start of 2020, the chemicals and materials science industry has weathered an extraordinary succession of disruptions: the COVID-19 pandemic, historic supply chain breakdowns, surging inflation, raw material shortages, geopolitical turmoil, and now a resurgence of protectionist trade policies. Each of these might be considered a once-in-a-decade event, yet we faced them all in the span of five years.   

Amid this climate of uncertainty, some would-be sellers hit the pause button on sale plans, choosing instead to focus internally and wait for better conditions. Fewer sellers coming to market led year-over-year M&A transaction volumes in the broader chemicals industry (as reported by S&P Global’s Chemical Week) to decline by 6% in 2023 and another 4% in 2024. Deals continued to get done, but the market certainly cooled off following the frenzy of 2021.

As we got through the U.S. election last year and turned the page towards 2025, there was a hopeful buzz that calmer waters lay ahead. A new, ostensibly more business-friendly administration took office, and many predicted a banner year for M&A, with expectations that greater policy certainty would serve as a catalyst for economic growth and deal-making. Unfortunately, these hopes began to fade during Q1 as chatter about potential tariffs grew louder. The plot twist officially arrived in early April, when the United States enacted broad-based tariffs on major global trading partners. Virtually overnight, a fresh dose of macro uncertainty set in. 

The good news is that, for most companies in the adhesives and sealants industry, the direct impact from tariffs has been manageable. Why? Largely because over the past few years, manufacturers have intentionally localized production and diversified suppliers (where possible) as a risk mitigation strategy. They learned from the pandemic and subsequent supply chain crisis that coupling local sourcing with local production isn’t just efficient – it's vital. So when the tariffs hit, companies like H.B. Fuller could confidently say that “97% of what we sell in a region is produced in the same region,” which “reduces our exposure to tariffs.” Similarly, Arkema noted during its second quarter earnings call that its industrial footprint being close to customers “protects the group from the direct impact of higher tariffs.” The point is that most of the impact from tariffs has been secondary in nature. While weaker end-market demand and general macro uncertainty continues to be an issue across the industry, tariffs themselves haven’t impacted income statements as much as some had feared. This means that adhesives and sealants producers have maintained their financial flexibility and capacity to invest, which is encouraging news for M&A.   

Going back to the data, September year-to-date M&A volume across the global chemicals industry is down about 4% relative to the year-ago period (and likely down more than that in North America). So yes, fewer deals continue to get done overall. However, when we zoom in on transaction activity and related commentary from executives in the adhesives and sealants industry, it’s clear that M&A remains top of mind and a key priority for most. In fact, one could argue that in an environment plagued by sluggish demand and lower organic growth, companies may lean on acquisitions even more as a potential growth engine. 

Strategic Buyers: Hungry and Well-Funded

Let’s hone in on six major players in the adhesives and sealants industry (Arkema, Avery Dennison, H.B. Fuller, Henkel, RPM, and Sika). We’ll refer to this group as the “GM Adhesives Index.” In aggregate, companies in the GM Adhesives Index announced 15 acquisitions in 2024, deploying more than $2 billion of capital. This year through early October, they have announced only nine acquisitions. The drop in deal count isn’t because they’ve lost their M&A appetite or capacity. It’s largely because fewer targets have been up for sale. Some owners have been hesitant to launch a sale process in a period where financial performance is stagnant due to soft end-market demand or other macro headwinds. They’d rather wait and see if things improve, hoping that an uptick in performance could lead to a higher valuation (and more deal certainty) in the future. It's a rational mindset, but it has created a bit of a bottleneck in deal flow this year. 

The message from executives in the adhesives and sealants industry has been remarkably consistent: acquisitions remain central to growth plans. Henkel, for example, noted in its first half 2025 report that “we continue to build on M&A as an integral part of our strategy, with a promising and well-filled pipeline.” Similarly, RPM International’s CEO, Frank Sullivan, highlighted on a recent earnings call that RPM had just completed the largest M&A year in its history, and that the company “has an appetite for anything in our space.”  

From a financing standpoint, most balance sheets across the adhesives and sealants industry are quite healthy. Looking across our GM Adhesives Index, the average net debt to EBITDA ratio throughout 2024 was slightly above 2.0x and stood at 2.2x as of Q2-2025. That’s a very comfortable level – well below what most would consider a “highly leveraged” balance sheet. (As a rule of thumb, net debt under 4x EBITDA is manageable, and many public companies unofficially aim to stay at 3x or less to preserve flexibility.) In other words, the majors have plenty of capacity for acquisitions. In fact, only one company in our index, H.B. Fuller, carries more than 3x leverage, and management publicly committed to tapping the brakes on M&A to focus on reducing debt below 3x. Aside from H.B. Fuller (which we expect to see back at the table soon), the industry is well positioned to fund acquisitions, particularly the bolt-on type deals that are in vogue today (more on this later).

Looking to Adjacent Markets

One interesting trend we’ve observed is that industry leaders are getting more creative with their M&A approach. After a decade or two of heavy consolidation in the adhesives and sealants space, the landscape has changed. Today’s major adhesive and sealant companies rose to prominence by acquiring many of the readily available targets, especially across North America and Europe. Royal Adhesives & Sealants, for example, rolled up 19 companies and was later acquired by H.B. Fuller in 2017. Dozens of other small and mid-sized adhesive companies have been snapped up along the way. The result is a market structure consisting of a handful of large, global players and many smaller, more niche companies, but relatively few mid-sized independents. For a strategic buyer, the choice then becomes buying a relatively small company or pursuing a large, transformational deal. And in the current environment, most companies don’t have a strong appetite for mega-deals. So what are buyers doing instead? Broadly, two things: (1) continuing to focus on strategic bolt-on acquisitions in their core markets, and (2) pushing into adjacent markets to open up new avenues for growth. Let’s talk about the adjacency strategy first. 

Adjacent-market expansion involves acquiring a business that isn’t a “traditional” adhesive or sealant producer, but one that is closely related – often serving similar customers or end users with complementary products and/or technology. Henkel provides a case study. In November 2023, Henkel acquired Critica Infrastructure, a U.S.-based supplier of specialty composite solutions used to repair and reinforce pipelines and other infrastructure. Critica isn’t an “adhesives” business per se; it’s more in the specialty coatings and structural materials arena. But those products solve similar problems (protecting and bonding infrastructure) and are sold to similar customers as some of Henkel’s core adhesive and sealant product lines. Henkel followed up in early 2024 by acquiring Seal For Life Industries, which makes protective coating and sealing solutions for infrastructure and pipeline markets. By adding Critica and Seal For Life, Henkel created a new high-growth platform adjacent to its core adhesives and sealants business – one focused on maintenance, repair, and overhaul (MRO) solutions for critical infrastructure. These deals brought new technology and end-market exposure while leveraging Henkel’s existing global reach and technical expertise. We see this example as a deliberate adjacency play. Henkel is still very much an “adhesive and sealants” leader, but it’s extending into overlapping spaces where it can find incremental growth, high margins, and new technical capabilities.   

Bolt-On Deals Remain the Favorite

Now let’s shift to the other M&A trend we have seen for several years: an overwhelming preference for bolt-on acquisitions over transformative mega-deals. Large acquirers have made it clear that, in general, they’d rather pursue a steady stream of smaller deals than swing for the fences on a huge takeover. 

Sika provides a good illustration of this bolt-on philosophy. In a recent investor presentation, Sika shared its “M&A funnel” data spanning 2020-2024. During that five-year period, Sika looked at ~350 potential targets, formally analyzed more than 150, conducted due diligence on 41, and ultimately completed 16 acquisitions. Interestingly, 15 of those 16 deals were bolt-on acquisitions with average sales of CHF 50 million (around $60 million). The single exception was Sika’s purchase of MBCC (the former BASF Construction Chemicals business) – a true mega-deal with a purchase price of $6 billion. But aside from MBCC, Sika has clearly favored the bolt-on approach. And they’re not slowing down. So far in 2025, Sika has announced five more bolt-on acquisitions across various geographies. On Sika’s H1 2025 earnings call, CEO Thomas Hasler commented that Sika sees a “great opportunity to consolidate this fragmented industry further” in the months and years ahead. This is well said, and it’s a philosophy shared by most of the larger players in the adhesives and sealants market. 

Why are bolt-ons so popular? Two main reasons. First, most of the available targets these days are smaller companies with less than $50-100 million of revenue. For a buyer, these smaller deals might not individually move the needle on sales, but they can cumulatively add up and fill strategic gaps in technology or regional presence. And second, bolt-ons are all about risk management. In an environment characterized by persistent uncertainty, executives and boards feel more comfortable taking multiple small bites instead of trying to swallow a whale. A bolt-on acquisition is usually easier to integrate, requires less financing, and if the integration doesn’t go well, it’s not going to jeopardize the entire company. In contrast, a poorly executed multi-billion-dollar merger could be catastrophic. For now, most companies are perfectly happy hitting singles and doubles. 

There also can be a synergy advantage with bolt-on deals. When a global player acquires a much smaller company, the opportunities for revenue and cost synergies can be significant relative to the target’s size. A big company likely has manufacturing scale, entrenched distribution networks, procurement power, and back-office infrastructure that a $50 million revenue business simply does not. By plugging that smaller business into the larger platform, the buyer can often rapidly improve sales and margins in ways the seller couldn’t on its own. 

We heard a powerful summary of this on H.B. Fuller’s fiscal Q4 earnings call last January. During that call, management noted that the company had completed six acquisitions during fiscal 2023 for a total of $216 million and an average “pre-synergy” EBITDA multiple of roughly 15x. These all were modest-sized businesses across various adhesive technologies (classic bolt-ons). The following year, in fiscal 2024, total Adjusted EBITDA from those six companies grew nearly 90% and EBITDA margin expanded from 8% to 21%. By successfully executing its integration plan – leveraging internal manufacturing capabilities, cross-selling to global customers, generating cost synergies – H.B. Fuller turned these six “small” acquisitions into a major value creator for the company. Management reported that the “post-synergy” EBITDA multiple for these deals is now less than 6x, and it’s expected to drop to 4x by fiscal 2026 as the growth trajectory continues.  This demonstrates why paying what might seem like a “high” multiple up front can ultimately be very rational for a buyer, assuming it is confident it can successfully integrate the business and unlock synergies. It also helps explain why valuations for high-quality targets have remained relatively high despite the slower market: buyers know that if they buy the right companies and execute well, the returns will be strong. 

Addition by Subtraction: Carve-Outs and Divestitures on the Rise

Another noteworthy trend is the increasing use of divestitures as a portfolio management tool. Rather than holding onto businesses that aren’t core or that don’t align with strategic objectives, executives and boards are asking “Could this business create more value for someone else? Would we be better off redeploying that capital elsewhere?” Often, the answer is yes. By carving out and selling a non-core division, a company can free up cash (and management bandwidth) to reinvest into higher-growth, higher margin areas, or to pay down debt or even return money to shareholders. In essence, companies are finding ways to grow by shrinking, and we’ve seen a few notable examples of this “addition by subtraction” over the past year.  

One such example was H.B. Fuller’s December 2024 divestiture of its flooring adhesives business to Pacific Avenue Capital Partners, a Los Angeles-based private equity firm. Why did H.B. Fuller sell this business? Mainly because it had structurally lower margins and slower growth prospects compared to H.B. Fuller’s core business and didn’t meet the company’s long-term profitability targets. As CEO Celeste Mastin put it, the divestiture was “consistent with our strategy to drive our portfolio and capital allocation to the highest margin, fastest growing segments of the $80 billion global adhesives industry.” Importantly, around the same time that Fuller was divesting its flooring business, it was also acquiring high-margin adhesive companies like ND Industries (a U.S. manufacturer of adhesives and specialty materials for fasteners and assemblies) and GEM srl (an Italian manufacturer of medical adhesives). The cumulative impact of this portfolio activity was tangible. On its fiscal Q2 earnings call in June, the company reported a notable increase in its EBITDA margin, attributed in part to the “strategic addition of higher-margin businesses and divestiture of the lower-margin flooring business.” This is a great example of how portfolio moves can improve financial performance. H.B. Fuller has publicly stated a strategic goal of achieving 20% EBITDA margins, and portfolio management is one lever they can pull to get there. 

To be clear, divestitures aren’t exclusively for businesses with lower margins or slower growth. Many corporate carveouts feature extremely high-quality businesses that simply do not align with the parent company’s corporate goals. This was undoubtedly the case when Ashland divested its Performance Adhesives business to Arkema in 2022, allowing Ashland to complete its multi-year transformation into a focused additive and specialty ingredients company.  

Looking ahead, we expect the trend of carve-outs in adhesives and sealants (and chemicals more broadly) to continue, and potentially even accelerate. We’re certainly seeing this in our own advisory practice, as carve-out transactions have accounted for roughly one-third of our closed engagements in recent years and remain a very active area for us today. 

Private Equity: Buying Aggressively, Exiting Selectively

The private equity community has long had an affinity for the adhesives and sealants industry, and that remains as true as ever today. Adhesives and sealants businesses have the qualities that PE investors love: reliable cash flows, high margins relative to many chemical sectors, and a fragmented universe that allows for consolidation plays. Over the last couple of years, we have seen PE firms continue to invest in the space, even as market-wide PE exits (sales of portfolio companies) have slowed. 

On the buy side, both new platform investments and add-ons have been happening at a steady clip. Goldner Hawn continued expanding its portfolio company Matrix Adhesives Group through the acquisitions of NewStar Adhesives (manufacturer and packager of industrial adhesives) in late 2023 and Roman Adhesives (manufacturer of wallcovering adhesives) in early 2025. These acquisitions bring new products lines, additional manufacturing and packaging capabilities, and expanded distribution channels to the broader Matrix Adhesives platform.  

The fragmented adhesives distribution space has been a hotbed M&A in recent years as well. Applied Adhesives, an Arsenal Capital portfolio company acquired from Goldner Hawn in 2021, completed 17 add-on acquisitions over a four-year period and was successfully sold to Bertram Capital in April 2025. Bertram called Applied’s strong customer relationships, technical capabilities, and proven M&A playbook an “ideal foundation” for continued growth, both organically and through strategic acquisitions. The deal underscores that quality companies can find buyers even in a cautious market, and that opportunity for continued consolidation remains a cornerstone of the private equity playbook. 

Another value-added distributor, Krayden, was acquired by Audax Private Equity in April 2023 from Quad-C Management. Audax is a Boston-based PE firm well known for its buy-and-build approach. Fifteen months later, Krayden acquired Aerospheres LTD, a UK supplier of aerospace materials supplying the commercial airline and MRO sectors. And earlier this year, Krayden added on CAPLINQ, a Europe-based supplier of specialty chemicals, adhesives, and plastics.  

It's interesting to note that, while Krayden and Applied Adhesives represented successful exits for private equity firms, market-wide exit activity for PE firms has slowed significantly. Over the last few years, the headwinds we’ve been discussing, including higher interest rates (which can affect deal financing and valuations), general macro uncertainty, and now tariffs, have led many PE owners to delay launching a sale process. May 2025 data from Pitchbook indicated that the average hold period for U.S. PE-backed companies has risen steadily over the past few years, reaching approximately 3.5 years in 2025 (compared to just 2.5 years in 2017-2019). In addition, more companies are now being held for 5+ years, something that was far less common a decade ago. 

The most important factor driving this is the fact that PE firms don’t have to sell based on the hold period alone. If they don’t feel like the market will support an attractive exit for a business, financial sponsors have shown they are willing to wait it out. Most PE funds have investment periods that allow them to hold companies for 5–7 years or more. A longer hold period can come at a cost though, as it delays returning capital back to the fund’s investors. This can make it harder for the PE firm to raise new funds. And there is a point at which the pressure mounts – typically once a hold period starts to exceed 5 or 6 years. Therefore, we do expect to start seeing an uptick in PE exits in the year ahead, particularly as we see more confidence and optimism return to the market. 

Outlook: Proceeding with Cautious Optimism

What do we expect as we look ahead? In short, we are cautiously optimistic that M&A activity in adhesives and sealants will accelerate over the coming 12-18 months. We don’t have a crystal ball (and if the last few years have taught us anything, it’s to expect the unexpected), but there are several reasons to be optimistic as we head toward 2026. 

First, some of the macro uncertainties may begin to abate. The initial shock of the tariffs seems to be behind us. Monetary policy is starting to ease, with the Fed lowering its benchmark lending rate by a quarter point in mid-September. Current consensus is that rates will be cut further during upcoming FOMC meetings. If that holds true, the cost of capital will gradually come down, which may help stimulate M&A. 

Second, the fundamental drivers of M&A in adhesives and sealants remain intact. Large strategic buyers need acquisitions for growth. It’s part of their DNA and explicitly built into their strategic plans. If anything, slower organic growth has made acquisitions even more important as growth catalysts. Likewise, private equity’s appetite for deals is not going away. PE firms globally have record levels of uninvested capital and are motivated to put that money to work. And as PE groups start working through the backlog of companies they need to exit, we’ll see more companies on the market. 

Third, we expect to see a continued bias toward bolt-ons rather than mega-deals. While the current environment is less conducive for “bet the farm” type deals, it’s prime time for highly-synergistic bolt-on deals that buyers have gotten down to a science. We also anticipate portfolio pruning will continue, presenting attractive opportunities for other strategics or for new PE platforms to be built around those carved-out assets. 

Stepping back, our outlook for M&A activity in adhesives and sealants is guardedly upbeat. We expect the pace of M&A to pick up as we head through the fall and into 2026. Part of this view reflects what we’re seeing in our own deal pipeline right now. To be sure, we’ll likely continue riding some waves of uncertainty. External risks still abound and could cause some choppiness.  

While the past few years have been anything but normal, there is growing optimism that we may finally be headed back toward “business as usual” in the M&A world – and before too long, perhaps even a return to the “glory days” of robust deal activity. The adhesives and sealants industry has proven its resilience through a barrage of challenges, and its key players (both strategics and PE) have only grown more sophisticated and prepared in how they approach deals. If 2021 was a high-water mark, the last few years has felt like a forced pit stop. Now, as we gear up for 2026, we think the engines will start revving again. Opportunities are emerging, and those who have stayed focused and balanced will be in the best position for success.