Global management consultancy, Kearney, sees rebound in M&A activity in the Middle East chemicals sector in the next 12 to 18 months.

 

A new report titled “Chemicals M&A: deal activity remains sluggish but rebound signs are there,” discusses industry trends and makes predictions for mergers and acquisitions (M&A) activity in the chemicals sector for the coming year. 

 

Globally, pressure is mounting for the chemicals M&A market to open up. While downstream derivatives and specialties are growing globally due to lower cyclicality and higher margins, this segment remains marginally relevant in the Middle East. Regional players have yet to fully leverage M&A for growth in specialties and conversion segments. 

 

Pivotal juncture

“The Middle East's chemicals sector is at a pivotal juncture, with clear targets and a focus shift towards downstream integration and value-added segments,” said Jose Alberich, Partner, Middle East and Africa at Kearney. “While historically M&A activity in the region has been cautious, we are now witnessing a significant acceleration driven by strategic investments and a growing ambition to capture a larger share of the global market. Recent deals by major players like Aramco and Adnoc underscore the region's commitment to leveraging M&A as a key growth lever, setting the stage for a dynamic and transformative period ahead.”

 

The 10th edition of the Chemicals Executive M&A Report explores the various factors leading to expectations of an increase in M&A activity in the next 12 to 18 months, including growing public concern and heightened environmental awareness, stricter regulatory environments, particularly in Europe, and historic levels of dry powder held by private equity (PE) investors in the space. The 2024 Chemicals Executive M&A Report offers recommendations for chemicals companies as well as a forecast for likely deal activity. 

 

Strong optimism

The report looks at the various factors contributing to an expected rebound in M&A activity in the chemicals sector after a five-year downward trajectory, including:

*Strong optimism (51%) among executives that M&A activity will increase

*Chemicals companies standing at or below 5-year historic valuations

*New opportunities created by major chemicals players’ plans to restructure in coming months

*Analysis of last year’s top deals, driven by consolidation, scale, and vertical integration 

Fundamental shifts in the industry, such as: 

*Sustainability-related pressure from government policies and shareholders

*Expansion of new sustainable, carbon footprint-reducing products

*Shift to innovative, customer-facing models in recycling, renewables, and specialty

*Regulations and growing demand for sustainable products as significant deal driver 

 

“For M&A in the chemicals space, it’s been a year of comeback from geopolitical pressures, high interest rates, and the resulting hold on many companies’ decarbonisation plans,” said Kearney partner and report-co-author Sudeep Maheshwari. “Decarbonisation goals should reappear strongly in the coming year. Chemical executives we spoke with expect strategic investors such as national oil companies (NOCs) to move faster in deal-making than PE investors, with high interest rates precipitating an increase in divestments and asset carve-outs.”--TradeArabia News Service