Global chemicals industry deal activity continued to be robust this quarter with the announcement of two multi-billion dollar Industrial Gases divestitures as critical steps to complete the Praxair/Linde merger. Outside of Industrial Gases, M&A activity remained strong despite sensitive economic factors, such as rising tariffs and NAFTA implications. Interestingly, we started to see the first wave of deals with objectives to institute a plan B in foreign jurisdictions to avoid supply chain disruptions as a result of enforced tariffs.
As larger companies consolidate during 2018, investments were higher this quarter in niche and smaller companies, which subsided the pace of megadeals. Nonetheless, lack of innovation and organic growth of large public chemical companies would likely drive megadeals in the coming quarters.
Moreover, Specialty Chemicals deals are expected to rebound as companies target pure-play portfolio and divest from non-core assets. For 2019 and the rest of 2018, inexpensive financing and strong economic conditions would strengthen higher deal valuations and push the overall M&A activity.
“Four $3 billion+ cross-border deals dominated chemicals deals league tables this quarter. We believe this resurgence of cross-border deal making will continue as regional players expand their global footprints to cope with current trade/tariff situations and take advantage of quality assets made available due to antitrust concerns of completing megadeals.”