TMT

TMT

The chemicals sector saw several blockbuster deals over US$3 billion in 2016, following on from the headline-grabbing Dow and DuPont merger in 2015. The most notable of these was perhaps the Bayer-Monsanto deal.

1000

Contact

Related content

Smart Businessman Using Digital Tablet in city

The chemicals sector saw several blockbuster deals over US$3 billion in 2016, following on from the headline-grabbing Dow and DuPont merger in 2015. The most notable of these was perhaps the Bayer-Monsanto deal.

“It is a good example of the kind of transformational, portfolio-shifting transactions we’ve seen in the chemicals sector recently. It shows there is a huge appetite for large transactions. Strong earnings and a lack of M&A activity over the preceding two or three years means that a lot of companies have large war chests to invest. And with debt funding still cheap, there is strong appetite for M&A,” says Christian Specht, XXX at KPMG in Germany.

Another example of the transformational deals driving M&A activity is the announced US$3.2 billion acquisition of surface treatment provider Chemetall by BASF.

“These deals are signs of the on-going portfolio shifting we are seeing in the market,” says Specht.

“In Europe, some of the larger chemicals companies have even been facing the prospect of negative interest rates, so they were under enormous pressure to do something with their capital. And of course, one of the main ways to deploy capital more effectively is through M&A.”

“At the same time, margins have been under pressure and R&D is getting more and more expensive, particularly in key sub-sectors like pharmaceuticals and agro-chemicals, so companies are trying to find synergies to help reduce costs.”

“In the past, CEOs were looking for the perfect 10. Now they are realizing that is unrealistic, so they are happy to go with an 80 percent or 90 percent fit instead. This is having an impact on overall levels of M&A activity, as those acquisitions are then trimmed to better fit the portfolio and non-core activities are sold off,” says Specht.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.

 
Read more