Global Q3 chem M&A falls on fewer megadeals – PwC

HOUSTON (ICIS)–Both the number and volume of chemical mergers and acquisitions (M&A) fell year on year in the third quarter, the consultancy PwC said on Thursday.

Companies announced 20 deals worth $10bn in the third quarter, down from 26 deals worth $21bn during the same time last year, PwC said. The average deal size was $525m, down from $793m from the same time last year.

Source: PwC

The chart below shows the volume and value of announced chemical M&A during the past several quarters.

The largest deal announced in the third quarter was BASF’s agreement to buy the nylon business of Solvay for $2.2bn, PwC said.

Last year, the largest announced deal in the third quarter was the merger of equals between PotashCorp and Agrium. That deal was valued at $13.1bn at the time.

Among the Q3 deals announced this year, specialty chemicals continued to dominate. They accounted for 67% of deals in terms of value, and 50% in terms of volume, PwC said.

Strategic investors continued to be more prevalent than financial ones, PwC said.

Strategic investors made up 74% of deal value and 50% of volume, PwC said. While the numbers are high, they are lower than previous quarters, indicating that private-equity firms are taking a greater interest in the chemical industry.

Looking ahead, some of the historic M&A deals could result in divestitures and spin-offs as these companies try to bring these deals to fruition, PwC said. This should drive deal-making in subsequent quarters.

Other trends that could affect chemical M&A include the oil prices and the US dollar. During the third quarter, the dollar had been weakening and oil prices had been recovering, PwC said.

If these trends continue, demand could rise for chemical products, and balance sheets for companies could strengthen, PwC said.