In this edition, we review the Chinese chemicals sector, looking at how the sector has developed through the growth of both State-Owned Enterprises (SOEs) and Privately-Owned Enterprises (POEs) and provide a future outlook for the development of this growing and competitive sector. We also review the chemicals M&A market, including the major influences impacting the global M&A landscape and what we can expect in the future.
As the Chinese chemical industry grows bigger, it faces a number of increasingly complex challenges. From feedstock, overcapacity in petrochemicals and environmental sustainability to human resource issues, every level poses its own difficulties. There is still a long way to go, but the whole world should be aware that this is an era of rapid and far-reaching transformation for China’s chemical industry.
In the US, the strength of the business case and a matching of long-term supply and demand is critical at the commodity end of the market. At the same time, delivering on synergy targets and robust integration are keys to returning shareholder value on highly priced specialty deals. In emerging markets, up-front risk mitigation, combined with a portfolio approach that is not limited to China will help companies capture the broad array of available benefits.
In Europe, the strategy is to focus on quality business units, ruthlessly restructure the operational cost base, and take the time to carve out and successfully divest non-performing assets. In all locales, a tailored due diligence is key and can help acquirers engage in the most successful deals.
The challenge for global chemical companies is that achieving one of the above is simply not enough. A successful business strategy requires all aspects to be performed equally well (and often at the same time) to fully benefit from an upturn in chemical industry M&A activity.