The chemicals industry has witnessed massive structural changes over the past decade, and
consolidation is expected to continue. Mounting competition from new producers in emerging
markets and resource-rich regions, rising oil prices and greater regulation have made life much
harder for the traditional industry players. The sector’s generally poor financial performance
throughout the late 1990s and early 2000s also elicited considerable pressure from the capital
markets, and the corresponding fall in values attracted the interest of private equity firms. All
these factors have helped to produce a surge in deal-making in the sector.
This study sheds light on the main trends in the industry, together with their impact on mergers
and acquisitions, between January 2003 and December 2005. In all, there were 2,138 deals
in the chemicals sector, but the vast majority of such transactions were quite small. We have
analysed the 245 deals worth US$50 million or more by sub-sector and geographical spread,
whereas we have reviewed smaller deals in much less detail.
We have devoted a special section to financial investors, in view of the considerable interest
displayed by private equity firms and the nature of their business model as temporary
investors. We have also drawn on our global experience as advisers on numerous major deals
to provide a series of deal dialogues throughout the report, which highlight some of the critical
issues for chemicals companies engaging in mergers and acquisitions.
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