20160401-德勤-2016_Global_chemical_industry_mergers_and_acquisitions_outlook__A_quest_for_focus_22页_2mb

Summary of Deloitte 2016 Global Chemical Industry Mergers and Acquisitions Outlook

Core Content

This document provides an outlook on the global chemical industry's mergers and acquisitions (M&A) activity for 2016, based on 2015 trends and challenges. It highlights the industry's ongoing shift towards focusing on core competencies and end markets, driven by economic pressures, commodity price declines, and shareholder activism. The report also examines the role of spin-offs, the impact of new technologies like additive manufacturing, and regional activity across key geographies.

Main Points and Trends

Global M&A Activity in 2015

• M&A activity remained strong in 2015, with the number of deals exceeding the previous six-year average by over 6%.
• The total global deal value set new records, fueled by 16 deals valued at over US$1 billion, including the proposed US$73 billion Dow and DuPont merger.
• Despite a flat deal volume compared to 2014, the industry continued to prioritize focus and scale, especially in the agricultural chemicals segment.

Challenges and Drivers

• Commodity Price Volatility: Oil prices fell below US$40 per barrel in 2015, affecting upstream petrochemical prices and deal valuations.
• Economic Pressures: Global economic growth slowed, impacting industrial production and, consequently, chemical demand.
• Shareholder Activism: Activist shareholders and proactive management have pushed for corporate realignment, portfolio rationalization, and greater focus on core businesses.
• Additive Manufacturing: This emerging technology is expected to disrupt certain manufacturing sectors and increase the importance of specialty chemicals, with polymer consumption in additive manufacturing projected to reach US$4.3 billion by 2023.

Segment-Specific M&A Activity

• Commodity Chemicals: Activity remained relatively flat compared to 2014 but was higher than pre-2012 levels. Companies are focusing on efficiency and cost reduction, especially in segments like titanium dioxide, butadiene, and xylene.
• Intermediates and Specialty Materials: Companies pursued scale in core businesses, with notable deals such as Solvay's acquisition of Cytec for US$6.4 billion and Platform Specialty Products' acquisition of Alent Plc for US$2.3 billion.
• Fertilizers and Agricultural Chemicals: A downturn in agricultural markets led to reduced demand and lower farm incomes, prompting cost-cutting strategies. The proposed Dow and DuPont merger is expected to create a US$19 billion agricultural chemicals company, signaling potential for further consolidation.
• Industrial Gases: Companies faced challenges due to lower industrial production growth, but M&A activity remained active, with Air Liquide's acquisition of Airgas being a key example.
• Diversified Chemicals: The Dow and DuPont merger was the largest deal of 2015, with a focus on creating three segment-focused entities. While such mega deals are unlikely to repeat in 2016, M&A activity is expected to continue as a means to enhance competitive positioning.

Geography-Specific Outlook

• United States: M&A activity was marked by a significant decline in volume but an increase in value, driven by large deals like the Dow-DuPont merger and Air Liquide's acquisition of Airgas. The US dollar's appreciation may impact foreign interest, but the US remains a key target market.
• Germany: M&A activity continued at high levels, with a focus on small and medium-sized transactions for portfolio optimization. Spin-offs are limited, but the Bayer-Covestro IPO was a major event.
• United Kingdom: Strong cross-border activity persisted, with notable acquisitions such as Alent plc and Alfa Aesar. UK companies are still attractive targets for international buyers.
• China: The second-largest M&A market globally, with most deals driven by local buyers. The focus shifted from strategic resources to advanced technology and market access. Despite a slowdown in 2016, valuations are expected to remain higher than in the US and Europe.
• Japan: M&A activity is expected to rise across all segments, driven by the shift away from uncompetitive petroleum-based chemicals and improved business conditions.
• Other Geographies: Activity was relatively stable, with continued cross-border deals and interest in specialty chemicals.

Key Information

• Spin-offs: Increasingly used as a strategy to realign portfolios, offering greater after-tax benefits and market valuations compared to sales or divestitures. The Dow and DuPont merger is expected to result in two major spin-offs.
• Shareholder Value: Companies are pursuing M&A to enhance shareholder value through focus, scale, and innovation.
• 2016 Outlook:
  • M&A activity is expected to remain strong, with a continued emphasis on core businesses and end markets.
  • The agricultural chemicals segment may see further consolidation due to the ongoing downturn in the sector.
  • Additive manufacturing and specialty chemicals are likely to drive new opportunities for collaboration and acquisitions.
  • The M&A market may accept low oil prices as the "new normal," reducing the impact of energy costs on deal activity.

Conclusion

The global chemical industry in 2016 is expected to continue its trend of consolidation and portfolio realignment, driven by the need for focus, scale, and innovation. While the US, Germany, and China remain key markets, the influence of emerging technologies and strategic shifts in business models will shape the M&A landscape. Spin-offs are likely to remain a popular strategy, especially for companies looking to enhance value and reduce complexity.