Chemicals M&A Update : IMAP partner report

Our IMAP partner from the US has published their latest report on M&A in Chemicals sector, titled “Downstream Tailwinds Spur Healthy Levels of Chemicals M&A” this December.

The report provides an in-depth analysis of the chemicals sector, focusing on downstream demand, transaction levels, and key takeaways.

  • It highlights the robust outlook for the sector, driven by increased manufacturing orders and declining input costs. The report emphasizes the positive impact of low-cost natural gas and strong domestic manufacturing on the sector’s performance.
  • While year-over-year deal flow has decreased, the manufacturing segment continues to dominate M&A targets.
  • The plastics subsegment has seen heightened demand, particularly in high-performance materials, and has recorded significant transaction volume growth.
  • The report also includes select transactions and public company data, demonstrating robust M&A activity and financial metrics.

The report’s key takeaways include the increased levels of manufacturing orders and declining input costs in the chemicals and plastics sectors, which have supported participants looking to expand production and capture heightened demand. The report also discusses the destocking that began in Q3 2022 and continued through 2023, which has largely been resolved, and the likelihood of expanded chemical manufacturing and restocking continuing into 2024.

It also highlights the buoyancy of the manufacturing segment in the M&A market, with a well-capitalized strategic buyer pool accounting for the majority of sector deals. Private strategics have comprised a significant portion of deals, with acquisition strategies including bolstering margin strength, expanding geographic and end market presence, and acquiring key product service lines.

The report delves into the healthy demand fueling plastics M&A activity, with heightened demand in the plastics subsegment driven by downstream customers in finished-product industries such as aerospace, automotive, pharmaceutical, and semiconductor manufacturing. It also discusses the inelasticity of purchasers of engineered plastic components and resins, contributing to healthy levels of M&A activity and a strong growth outlook in the subsegment. The report provides an analysis of the plastics material & resin manufacturing producer price index, which has remained elevated, and forecasts the growth of the U.S. plastics market.

Furthermore, the report includes valuation analysis, highlighting the premium valuations garnered by M&A targets in hot pockets of the market, such as plastics and food ingredients.

In summary, the report provides a comprehensive overview of the chemicals sector, emphasizing downstream demand, transaction levels, and key industry trends. It offers valuable insights into the sector’s performance, highlighting key takeaways, transaction data, and the firm’s expertise in the industry.

You may download the report from their website here