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Chemicals M&A activity continues rebound into 2025
Chemicals mergers and acquisitions (M&A) deal value and volume showed signs of a rebound in the second half of 2024. This was attributable to several factors, including central banks initiating rate cuts, inflation moderating and the overall destocking trend beginning to subside. We anticipate chemical deal activity to further rebound in the first half of 2025, as economic and political uncertainties ease in major countries. A renewed focus on domestic industrial policy and global supply chain realignment, coupled with increased private equity exits, will likely lead to more assets in the market, driving deal activity.
Recent developments that are expected to influence deal activity include:
- The US has become a more lucrative destination for chemical M&A activity due to the shift to reshoring, attractive economic incentives, advanced energy infrastructure and the advantage of access to key raw materials and low-cost feedstock.
- China (one of the largest M&A markets in the chemicals sector) saw its highest level of M&A deal activity in the third quarter of 2024 versus the first half of 2024. Steady economic recovery and favorable policies sparked a rebound in dealmaking.
- European M&A activity continued at lower volumes as Europe has become one of the most expensive places globally to produce petrochemicals, with several major chemical producers announcing closure of their cracker plants.
- Continued interest in inorganic growth through technological capabilities, portfolio and geographic expansion is driving strategic decisions with many corporate buyers. These will likely result in tuck-in acquisitions, although large transformational deals are not off the table.
- Middle Eastern National Oil Companies and Sovereign Wealth Funds have become major players in chemical M&A activity, as evidenced by the large megadeal in the second quarter of 2024 in which Abu Dhabi National Oil Co. (ADNOC) acquired Covestro AG, a high-performance plastics and polymers manufacturer, for approximately $16.5 billion.
- Private equity funds are pushing up against longer hold periods, which will likely bring more portfolio companies to market.
Note: The primary M&A data source used in the 2025 outlook is S&P Capital IQ.
Strategic thinking
Geopolitical instability in Europe is driving increased demand for North American chemicals targets. Attractive feedstocks prices in North America are leading to more inbound deals as Europe continues to see feedstocks prices increase. In addition, election results will likely drive larger M&A activity in 2025 as there will be more clarity on regulatory issues and policies, which may ease the challenges for megadeals in the US.
“We have begun to see signs of the long-overdue chemicals M&A rebound materialize in recent months as economic and political uncertainties have started to ease.”
The bottom line
The chemicals sector is heavily influenced by the outcome of elections in major jurisdictions and changes in central bank monetary policy. The diverging of feedstock costs on different continents and a multipolar world will continue to drive cross-border M&A. Sophisticated dealmakers with international backgrounds and global perspectives may benefit from taking advantage of opportunities that arise.
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