global chemicals deals insights - year-end 2018 sectors/eum/pwc... · 2019. 3. 31. · chemicals...

20182018

Versus2017

Q4 2018versus

Q3 2018

Total deal value

Total deal volume

Average deal size

Global Chemicals Deals InsightsYear-end 2018

Executive summary

Two thousand and eighteen was a solid year for Global Chemicals M&A, with close to $100 billion in deal value, surpassing the previous year’s value of $64 billion. While global trade disputes may have hampered deal activity in the latter part of the year; lower corporate tax rates and access to capital led to fairly steady volumes and robust valuations. Investments in and valuations of the Specialty Chemicals category continued to be significant amid decreasing supply while diversified and commodity chemical valuations remained flat to declining given balanced demand and availability.

“Despite a number of continued macro economic factors such as trade tariffs, oil prices, and Brexit, we expect 2019 Chemicals M&A activity to remain upbeat. Similar to other sectors, we anticipate a decoupling of M&A from the broader economy given the record access to capital for both private equity and corporate buyers along with the continued focus on portfolio coherence.”

— Craig Kocak, US Deals Chemicals Leader

Trends and highlights

• Deal value in 2018 grew by 56% over the previous year to $99.6 billion. However, Q4 2018 deal value was $10.7 billion, a decline from Q3 2018 ($30.0 billion) which had four deals over $3 billion during the quarter.

• In volume terms, the year witnessed a slight decline of 8% over 2017 to 855 deals. Likewise, the Q4 2018 volume also declined by 11% to 200 deals vis-à-vis the previous quarter.

• Average deal size in 2018 was $212.9 million, 59% more than the prior year. However, the average deal size for Q4 2018 significantly declined to $92.1 million.

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$99.6 billion

855

$212.9 million

56%

8%

59%

11%

65%

65%

Note: Deal value and average deal size is based on deals with disclosed value. Deal volume includes all deals with and without disclosed value.

Highlights of 2018 deal activity

Deal value and volume overview

$12.6billion

4 mega-deals

PwC Deals Chemicals Deals Insights Year-end 2018 2

Deal value recorded in 2018 was $99.6 billion, increasing by 56% from previous year. Four megadeals during the year drove the growth. However, the deal value in Q4 2018 witnessed a significant decline of 65% vis-à-vis previous quarter. Deal volume for the year declined slightly by 8% vis-à-vis previous year to 855 deals. The trend continued in Q4 2018 as well, where the volume declined by 11% to 200 deals compared to previous quarter. Geopolitical tensions impacted the deal activity during the year although they are expected to ease in 2019, which will revive the growth momentum.

Largest transaction

The year’s largest deal was AkzoNobel’s divestment of its Specialty Chemicals division to The Carlyle Group for $12.6 billion. The deal repositions AkzoNobel as a global, pure-play leader in Paints and Coatings and is anticipated to accelerate consolidation in the global industry.

Megadeals ($5 billion and over)

The year witnessed four megadeals, which contributed $35 billion accounting for 35% of total deal value. In addition to the AkzoNobel divestiture, the other notable megadeals were the acquisition by Wanhua Chemical Group Co., Ltd. of its controlling shareholder Yantai Wanhua Chemical Industry Co. Ltd. for $10.2 billion. This deal creates the world’s largest urethanes raw materials company.

Deals by disclosed value and average deal size

Average deal size of $212.9 million witnessed an increase of 59%, compared to 2017. The year also witnessed a significant number of large sized deals (over $1 billion), which pushed the momentum.

$49 $72 $22 $50 $21 $13 $12 $18 $25 $34 $30 $11

192248

207 213237 219 216254

219 211 225200

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Disclosed deal value Deal volume (R-Axis)

Total deal value (in $ billion) and volume

$536$517

$232$425

$181$112$106

$137$206

$296$260

$92

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Undisclosed <$50 mn$50 mn to $250 mn $250 mn to $1,000 mn>$1,000 mn Average deal size (R-Axis)

Deals by disclosed value

Source: Thomson Reuters and other publicly available sources; ¹Megadeals defined as deals with disclosed value equal to or greater than $5 billion.

0

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Commodity ChemicalsFertilizers and Agricultural

Chemicals Industrial Gases Specialty Chemicals Diversified and Other

0.010.020.030.040.050.060.070.0

Highlights of 2018 deal activity, continued

Specialty Chemicals maintained its dominance with 61% contribution to deal value in 2018. The category contributed 49% of volume for the year. Commodity Chemicals contributed 29% in deal volume, along with 15% in deal value. In Q4 2018, Specialty Chemicals was the most significant category with 47% share in deal value.


Financial vs. strategic investors

Sub-sector analysis

Strategic investors accounted for 59% and 65% of deal value and volume, respectively, in 2018. However, financial buyers were more active in 2018 and we expect this trend to continue in 2019 given their significant level of dry powder and the expectation of non-core assets continuing to come to market.

48.0

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Strategic investors Financial investors

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132

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88142

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Financial buyer share of total value

Financial buyer share of total volume

Deal value ($ billion)

Deal volume

Financial investor share of M&A activity

Deal volume

Deal value ($ billion)

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ChemChina/Syngenta

Bayer/Monsanto

Potash Corp. ofSaskatchewan/

Agrium Inc.

BASF/Bayer Crop Science

Praxair/Linde

Akzo/Carlyle Yantai/Wanhua; Frutarom/IFF

Evonik/Air ProductsPMD; BASF/Chemetall

Taiyo Nippon Sanso/Praxair

7% 6% 22%

8% 56%

52%

27%

32%

27%

66%

23%

48%

0%

20%

40%

60%

80%

100%1Q

16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

Asia and Oceania North AmericaSouth America UK and EurozoneEurope ex-UK and Eurozone Africa/Undisclosed

43%

47%

46%

52%

46%

53%

56%

55%

54%

54%

52%

61%

0%

20%

40%

60%

80%

100%

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

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4Q18


Regional deal trends in 2018

Chemicals deals by region

Europe ex-UK and EurozoneLocal: 23 deals, $42 million Inbound: 9 deals, $1 million Outbound: 14 deals, $1.7 billion

UK and EurozoneLocal 85 deals, $3.1 billion Inbound 50 deals, $27.8 billion Outbound 46 deals, $6.1 billion

Asia and OceaniaLocal 436 deals, $32.6 billion Inbound 36 deals, $8.6 billion Outbound 38 deals, $20.4 billion

North AmericaLocal: 131 deals, $9.6 billionInbound: 47 deals, $13.5 billion Outbound: 39 deals, $21.7 billion

South AmericaLocal 15 deals, $4,250 million Inbound 13 deals, $96 million Outbound 1 deal, $0 million

Africa/UndisclosedLocal 5 deals, $74 million Inbound 5 deals, $0 million Outbound 22 deals, $136 million


46%

45%

44%

53%

48%

51%

56%

54%

54%

56%

53%

59%

0%

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60%

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100%

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18


Asia and Oceania continues to lead the deal activity with 55% of the deal volume and 53% of the deal value this quarter, as acquirer. The Asia and Oceania region followed, and accounted for 31% of acquirers in deal value, with 20% of deal volume this year. Asia and Oceania remained the most active target region also with 41% of the deal value, followed by the UK and Eurozone with 31%. In Q4 2018, the Asia and Oceania region maintained its dominance with 48% of deal value, as an acquirer, and 59% of contribution in deal volume.

Share of deal volume by acquirer region

5% 5% 21%

9% 47%

52%

37%

32%

32%

59%

66%

48%

0%

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40%

60%

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100%

1Q16

2Q16

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4Q16

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3Q18

4Q18


Share of deal value by acquirer region

Share of deal volume by target region Share of deal value by target region

Regional analysis

Chemicals top deals 2018 and outlook


Chemicals sector outlook

Deal activity in the global Chemicals industry remains robust with rising deal values offsetting declining deal volume. Private equity buyers are increasingly active, including firms that are new to investing in the Chemicals industry. Consolidation in the Specialty chemicals industry has reduced the overall pool of larger, high-quality targets. As a result, trading multiples for Specialty chemicals companies continue to increase with decreasing supply. Private, family-owned Specialty Chemicals companies are increasingly entering into the M&A target pool with the increase in trading multiples. Sectors are likely to see increasing activity include health and nutrition additives, plastics compounding, coatings, adhesives, specialties distribution and specialty materials.

Consolidation of agrochemicals/seeds and Industrial Gases is anticipated to drive reduced deals volume given recent transactions in the US and Europe. Regional deals in diversified and commodity chemicals are anticipated to draw increased interest as Asian chemical companies seek to build scale in their region and expand into Europe. Diversified and commodity chemicals trading multiples are anticipated to be flat to declining given balanced demand and availability.

Further portfolio restructuring of global diversified chemical companies, and M&A involving larger pure-play Specialty Chemicals companies are potential drivers of deals activity in 2019. Major US and European diversified chemical companies continue to actively explore streamlining their portfolios through divestment, and evaluation acquisitions to buildthe scale and scope of their growth platforms. In addition, restructuring at several larger publicly traded Specialty Chemicals companies has increased portfolio coherence, but also place these firms in the crosshairs of global leaders.

Amidst these factors, we believe deal activity will remain upbeat in 2019, particularly in Specialty Chemicals, as strategic and financial investors focus on growing existing platforms, and accessing higher-growth markets to maximize this business cycle and position them for the next business cycle.

Announced Target name Target nation Acquirer name Acquirer nation Status Deal value* Category

03/27/18Akzo Nobel NV-Specialty Chemicals Business

Netherlands Carlyle Group United States Pending 12,566Specialty Chemicals

05/10/18Yantai Wanhua Chemical Industry Co. Ltd.

ChinaWanhua Chemical Group Co. Ltd.

China Pending 10,239Specialty Chemicals

05/07/18 Frutarom Industries Ltd. IsraelInternational Flavors & Fragrances Inc.

United States Pending 6,355Specialty Chemicals

07/05/18Praxair Inc.-European Industrial Gas Business

Spain Taiyo Nippon Sanso Corp. Japan Pending 5,827Industrial Gases

07/20/18 Arysta LifeScience Ltd. United States UPL Corp. Ltd. India Pending 4,200

Fertilizers and Agricultural Chemicals

05/17/18Sociedad Quimica YMinera de Chile SA

Chile Inversiones TLC SpA Chile Pending 4,066Specialty Chemicals

04/16/18 Bayer AG Germany Temasek Holdings (Pvt) Ltd. Singapore Pending 3,699Specialty Chemicals

07/16/18Linde AG - NA and SA Gas Business

United States Messer Group & CVC Germany Pending 3,300Industrial Gases

09/13/18Momentive Performance Chemicals

United StatesSJL Partners, KCC Corp. and Wonik Qnc Corp.

South Korea Pending 3,100Specialty Chemicals

02/15/18 A. Schulman Inc. United States LyondellBasell Industries NV United States Completed 2,250Specialty Chemicals

Key announced transactions (2018)

Source: Thomson Reuters and other publicly available sources; *In Million USD

About PwC Deals

Smart deal makers are perceptive enough to see value others have missed, flexible enough to adjust for the unexpected, aggressive enough to win favorable terms in a competitive environment, and circumspect enough to envision the challenges they will face from the moment the contract is signed. But in a business environment where information can quickly overwhelm, the smartest deal makers look to experienced advisors to help them fashion a deal that works.

PwC’s Deals group can advise chemicals companies and chemicals-focused private equity firms on key M&A decisions, from identifying acquisition or divestiture candidates and performing detailed buy-side diligence, to developing strategies for capturing post-deal profits and exiting a deal through a sale, carve-out, or IPO. With more than 20,000 deals practitioners worldwide, we can deploy seasoned teams that combine deep chemicals industry skills with local market knowledge virtually anywhere your company operates or executes transactions.

Although every deal is unique, most will benefit from the broad experience we bring to delivering strategic M&A advice, due diligence, transaction structuring, M&A tax, merger integration, valuation, and post-deal services.

In short, we offer integrated solutions, tailored to your particular deal situation and designed to help you extract peak value within your risk profile. Whether your focus is deploying capital through an acquisition or joint venture, raising capital through an IPO or private placement, or harvesting an investment through the divesture process, we can help.

For more information about M&A and related services in the global chemicals industry, please visit www.pwc.com/us/deals or www.pwc.com/us

The information presented in this report is an analysis of deals in the global chemicals industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into chemicals mid-industry group. Certain adjustments have been made to the information to exclude transactions which are not specific to chemicals or incorporate relevant transactions that were omitted from the SIC industry codes.

This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between October 1, 2015 and December 31, 2018, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.

Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.

About the data

© 2019 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This proposal is protected under the copyright laws of the United States and other countries. This proposal contains information that is proprietary and confidential to PricewaterhouseCoopers LLP, and shall not be disclosed outside the recipient’s company or du-plicated, used or disclosed, in whole or in part, by the recipient for any purpose other than to evaluate this proposal. Any other use or disclosure, in whole or in part, of this information without the express written permission of PricewaterhouseCoopers LLP is prohibited.

For media inquiries

Craig KocakUS Chemicals Deals LeaderPhiladelphia, [email protected]

For a deeper discussion on deal considerations, please contact one of our practice leaders or your local Deals partner:

Kazi IslamUS Chemicals LeaderPhiladelphia, [email protected]

Chris CardinalUS Chemical Deals Strategy LeaderPhiladelphia, [email protected]

Conrad BalejkoUS Chemicals Integration & Separation Leader617-530-5020Boston, Massachusetts [email protected]

Seamus JiangUS China Inbound Deals LeaderUS Chemical Deals Managing DirectorPhiladelphia, Pennsylvania [email protected]

Douglas LocastoUS Chemical Deals DirectorPhiladelphia, [email protected]

Carey BodenheimerDirector, External CommunicationsLos [email protected]

global chemicals deals insights - year-end 2018 sectors/eum/pwc... · 2019. 3. 31. · chemicals...

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