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Chemicals deals insights: 2021 outlook

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Executive summary

While chemical companies, as cornerstones of the global economy, are still feeling the pain from the ongoing global pandemic, chemicals sector deals volume started to rebound in Q320 primarily a result of favorable fiscal and monetary policies which have led to the stabilization of global capital markets. Deals value, however, remained depressed with only one megadeal announced in the second half of 2020. The $12 billion Wuthelam/Nippon Paint transaction is highly strategic to both parties to realign their portfolios in the Asia Pacific region as the industry pivots to a multimodal world.  

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Challenges and opportunities for deals in 2021

PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.

PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends

Chemicals deals outlook

As most countries struggle to find a balance between containing the COVID-19 virus and opening their economies, chemical companies around the globe are facing a prolonged period of uncertainty. The profound shift in ways of being and industry paths requires chemical companies to rethink their strategies and re-evaluate their current portfolios. Ample availability of capital for large public companies and private equity --  coupled with the need to establish redundancies in their global supply chain amid geopolitical uncertainties -- could also drive an increased level of deal activity in 2021. Investment themes will likely focus on specialty chemicals, consolidation and cross-border investment.  

“With no clear exit strategy of the pandemic, those who can best manage change will survive, thrive, and drive robust M&A activities in 2021.”

Craig Kocak, US Deals Chemicals Leader

Key deal drivers

New ways of being

In the last twelve months, the COVID-19 pandemic has shifted the way we live, work and move across the globe. Many of the changes in consumer behaviors and how businesses operate are likely to endure and will have a trickle-through impact on demand for chemical products. Chemical companies will likely focus on rethinking their business models and broadening their investment landscape to stay agile and tech-enabled, so they can thrive in the upcoming years post pandemic.

Shifting industry paths

End-markets of chemical companies have been affected very different during the pandemic. Specialty chemicals companies with end-markets focusing on hygiene, agriculture, nutrition and pharma have prospered. However, commodity chemical companies have struggled with lower demand coupled with higher operating costs needed to mitigate supply chain disruption and ensure workforce safety. We anticipate chemical companies will shift from stabilizing operations and preserving cash to doubling down on their core businesses and exploring strategic alternatives for non-core businesses. A boom in specialty chemicals M&A is likely as companies and private equity pursue growth and margin expansion in a low, organic-growth environment.

Pivot to a multinodal world

Even before the pandemic, geopolitical uncertainties and increased tariffs motivated global chemical companies to rethink their global strategy and footprint. The ongoing transmission of the coronavirus has further disrupted global supply chains and accelerated the pivot to a multimodal world. We expect increased cross-border deal activities as Chemical companies take actions to build regional hubs or seek regional alliances to mitigate supply chain risks while optimizing their global cost structure.

Future of capital

While macroeconomics remain a key driver for chemicals sector deal activity, capital availability has become an enabler. For large public companies and private equity, debt is historically inexpensive, and interest rates in major countries are expected to stay low in the coming years. On the contrary, medium and small private companies in certain sub-sectors are still catching their breath following a liquidity crisis earlier this year. This should pave the way for the largest players to consolidate smaller competitors through M&A in the next few years, both domestically and internationally. 

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Craig Kocak

Chemicals Deals Leader, PwC US

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Seamus Jiang

Deals Managing Director
China Inbound Deals Leader, PwC US

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A.J. Scamuffa

Chemicals Leader, PwC US

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