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Chemicals deals insights: 2021 midyear outlook

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What's driving deals in 2021

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.

Addressing disruption on the path to recovery

The chemicals sector’s deal volumes continued to rebound through the first half of 2021 primarily due to favorable fiscal and monetary policies that led to the stabilization of global capital markets. Deal values, however, have remained depressed with a near absence of megadeals over the past 12 months, with the largest deal in 2021 being Bain Capital and Cinven’s acquisition of Lonza’s speciality chemical business for $4.7 billion. Comparatively, megadeals accounted for approximately $115 billion in 2019 deal value prior to the COVID-19 pandemic.

Chemicals deals outlook

With light at the end of the tunnel, major global economies have been on a path of recovery of industrial production activities in the past few months. While there are still great uncertainties about how the world will be shaped after the pandemic, the chemicals industry  as the cornerstone of industrial manufacturing  has begun to benefit from economic recovery, modest inflation and ample availability of capital. To navigate a lingering uncertainty, chemical companies will need to redefine their value chains, address significant disruptions to operations and reevaluate their global supply chain and footprint. As such, we anticipate chemicals’ M&A activities will continue to increase for the remainder of 2021. 

Key deal drivers

Geopolitical and regulatory shifts

Disruption of global supply chains and increased commodity prices have continued to drive chemical companies to focus on building regional hubs and seeking regional alliances to mitigate supply chain risk. We have seen a recent increase in cross-border deal activity as a result and expect this trend to continue as the current momentum of geopolitical and regulatory shifts prevails.

Commitment to purpose and talent

The broad impacts of the COVID-19 pandemic on our way of life, including how we work and travel, will likely continue to reshape commercial and labor markets. Changing landscapes offer both challenges and opportunities for chemical companies to evaluate their commitment to purpose and talent in dynamic markets with scarce resources. In the face of these changes, chemical companies will likely need to place greater governance on balancing economic, social and environmental impacts. These governance priorities may extend beyond the organization to suppliers and customers, and inform investment theses and influence deal activity.

Divergence in strategy

The various effects of the COVID-19 pandemic on end-markets left winners and losers within the chemicals sector. Changes in demand caused by the pandemic were a boon to specialty chemicals companies with end-markets focusing on hygiene, agriculture, nutrition and pharmaceuticals. However, many commodity chemicals companies experienced decreased demand following the broad onset of the pandemic followed by supply-chain disruption and increased focus on workforce safety. As a result, we expect a divergence in the strategy of companies within these sub-sectors as specialty chemicals companies pursue new growth and margin expansion, while commodity chemicals companies employ capital resources to double down on core businesses and explore non-core opportunities to help mitigate impacts of changes in global market conditions.

The nature of capital

Capital availability continues to be an enabler for chemical M&A. Special purpose acquisition companies (SPACs) are joining publicly traded companies and private equity to compete for attractive assets, driving up deal multiples. Additionally, the net-zero commitments by many chemical companies have motivated special-purpose investment vehicles to emerge with a focus of investment in to-be-divested “carbon rich” chemical businesses.

“The recovery of the global economy from COVID-19 pandemic will drive increased activities in Chemicals M&A for the remainder of 2021.”

— Craig Kocak, US chemicals deals leader

Contact us

Craig Kocak

Chemicals Deals Leader, PwC US

Seamus Jiang

Deals Managing Director
China Inbound Deals Leader, PwC US

A.J. Scamuffa

Chemicals Leader, PwC US

Volker Fitzner

Global Chemicals Leader, PwC Germany

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