The beginning of 2018 has been marked by easing fiscal policy, tightening monetary policy, and turbulent trade policy. While changes in fiscal and monetary policy do not pose an immediate risk to economic growth, recent trade disputes could disrupt industry supply chains and in turn impact global GDP. Each of these trends has potential implications for M&A activity in the sector.
Lower corporate taxes will provide industry players with the capital to pursue acquisitions, although it is uncertain whether this will lead to increased M&A activity, as the easing fiscal policy could also benefit prospective sellers. Meanwhile, increasing interest rates would make debt financing more expensive, decrease stock valuations, and give companies with higher liquidity a competitive advantage.
On the trade side, we see conflict arising in several regions of the world. Recent tariffs on steel and aluminum are signs of increasing tension between the US and China. Furthermore, if the US withdraws from NAFTA, we may see an increased level of M&A activity in the North American region as industry players look to rebuild their supply chains.
“With industry transformation megadeals overcoming big regulatory hurdles, private equity buyers deploying dry powder and US tax reform benefiting global chemical giants, chemicals M&A activities will continue rebounding and accelerating. Trade tensions, if prolonged, may also have a profound impact on global chemical supply chains.”
US Chemicals Deals leader
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US Chemical Deals Strategy leader
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