Global chemicals industry deal activity continues to be aided by strong performance of Specialty Chemicals sub-sector, which also recorded most of the megadeals in this quarter. Anticipation of strong cash flow as a result of lower corporate taxes in the US increased investment sentiment of strategic buyers. On the other hand, high valuation multiples, rising interest rates and geopolitical concerns have kept private equity investors at bay despite record high dry powder. Additionally, the ongoing trade tensions between the US and China may limit the deal activity as companies could face liquidity and supply chain cost pressures and shift their focus on scenario planning to keep operations smooth. Specifically, as a response to the 25% import duties forced by the US, China’s countermeasures aimed to target large-volume chemicals made in the US along with some major plastics, such as polyethylene and polyvinyl chloride.
Amidst these situations, an anticipated correction in oil prices, required divestitures upon regulatory approval of megadeals and US tax reform are likely to offset the impact of these risks and continue to drive increased M&A activity throughout 2018.
“While high valuation, rising interest rates and ongoing trade tensions may have deal makers pause, we believe there’s enough tailwind keeping global chemicals M&A activities strong. Regulators have demanded sizable assets to be divested as approval conditions for several megadeals, filling a robust M&A pipeline for months to come.”
US Chemicals Deals leader, PwC US
Tel: +1 (267) 330 2777
US Chemical Deals Strategy leader, PwC US
Tel: + 1 (267) 330 1489