Mergers and acquisitions activity in the U.S. chemical industry recovered strongly in 2021 after experiencing a slowdown in 2020. Throughout 2021, quarterly deal count and value of chemicals M&A transactions outpaced those of 2020. As economies begin to emerge from pandemic-fueled lockdowns and consumer demand continues to grow, numerous industry observers are forecasting another robust year for chemicals M&A activity in 2022. If global access to vaccines becomes widely available, pandemic-induced restrictions start to lessen and bottled-up consumer demand continues to drive economies, the U.S. chemicals industry could see a full recovery to pre-pandemic levels. Transaction multiples hit record highs in 2021, and chemical companies are optimistic after seeing their operating margins improve from pandemic lows, leading many to feel comfortable allocating capital for growth.
The American Chemistry Council (the “ACC”), a Washington, DC-based chemical industry trade group, believes the 2022 outlook for the U.S. chemicals industry is positive, and credits the resumption of manufacturing activities, the easing of supply-chain disruptions and strong consumer demand. 2021 saw an increase in production volume in total chemicals, basic chemicals, specialty chemicals, and plastic resins.
Companies divesting lower-margin operations to align with their core business was a major theme of 2021, including: Celanese Corporation’s $1.2 billion acquisition of the thermoplastic vulcanizates business of ExxonMobil that are used in automotive, industrial and consumer products; Bain Capital’s $4.6 billion acquisition of Lonza Specialty Ingredients (a provider of specialty chemicals for microbial control solutions) from Lonza Group in February; Arkema’s agreement to purchase the performance adhesives business of Ashland Global Holdings for $1.65 billion in August; Lanxess’ agreement to purchase the microbial control business of International Flavors & Fragrances for $1.3 billion in August; and Draslovka Holdings’ agreement to acquire the Mining Solutions Business of the Chemours Company for $520 million in July.
Activity from private equity firms also drove M&A transactions last year, including Platinum Equity’s $5.25 billion acquisition of Solenis, a producer of specialty chemicals used in water-intensive industries, from Clayton, Dublier, & Rice and BASF. In June, Clariant reached definitive agreements for the divestment of its Pigments business with Heubach Group and SK Capital Partners. In July, Falcon Private Holdings reached a definitive agreement to sell Aristech Surfaces LLC to Trinseo, a global materials company, for $445 million.
Environmental activism has also placed pressure on companies to sell or separate themselves from carbon-intensive businesses, although that reason may not be explicitly stated. In February, Solvay announced it intends to organize its soda ash business into a separate and fully controlled legal structure.
In addition, global chemical M&A had a strong year with Thailand’s PTT agreement to buy German coating resins maker Allnex in a $4.75 billion deal, MKS Instruments, Inc.’s agreement to acquire Atotech Limited in a $6.5 billion transaction, Sika’s agreement to acquire MBCC Group for 5.2€ billion, DuPont’s agreement to acquire Rogers Corporation in a $5.2 billion transaction, and Standard Industries Holdings Inc.’s acquisition of W. R. Grace & Co. in a $7.0 billion transaction.
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