Deloitte report: M&A provides growth catalyst for chemical industry in 2013

NEW YORK, April 9, 2013 /PRNewswire/ -- Despite challenges associated with energy and feedstock volatility and regulatory policies, the global chemical industry is poised for modest growth in 2013 with merger and acquisition (M&A) activity likely to be a key factor in helping companies achieve top line growth. According to a new report from Deloitte Touche Tohmatsu Limited's (DTTL) Global Manufacturing Industry group, 2013 Global Chemical Industry Mergers and Acquisitions Outlook, the global chemical industry is experiencing a portfolio realignment putting increased pressure on companies to find new growth markets.

"We are looking at a market for 2013 and beyond where the financial influences of globalization, China's market maturation, and raw materials trends will position M&A as a highly effective strategic tool," says Dan Schweller, M&A Leader for DTTL's Global Manufacturing Industry group.

The report identifies multiple factors driving growth of M&A activity around the world particularly for North America, Europe, and China including new markets, shale gas discoveries and the progression of the Advanced Materials Systems industry. This is in spite of continued Eurozone concerns and slow recovery in other mature markets.

North America
In North America, chemical industry M&A activity has undergone a dramatic shift and the upswing is expected to continue.  The recovery of the construction market, shale gas availability and lower feedstock prices will likely play a role in increased M&A activity in 2013, according to the report.

The Deloitte report also predicts continued stamina for top-chemical commodity producers to consider new facility expansion and to restart suspended facilities in North America.  Top global chemical manufacturers are expected to invest more than US$40 billion in such projects over the next several years.[1]

"The North American chemical industry is showing dramatic change, attributable in part to favorable shale gas economics supporting the petrochemical sector," said Duane Dickson, Global Chemicals Sector Leader for DTTL's Global Manufacturing Industry group. "Companies that were looking to the Middle East and Asia for M&A investments just a few years ago are now turning their attention to growth opportunities in North America."

Europe
In Europe the chemical industry is among the most active sectors pursuing M&A opportunities, the report yields. Companies with liquidity are making acquisitions to transform their business and execute growth strategies. Key drivers of this activity include strong balance sheets, companies eager to build market positions in core areas, continued portfolio realignment, and an increased focus on international investments, especially in emerging markets.

A number of struggling companies, on the other hand, have been focused on improving operational processes to increase financial performance. In addition, some stressed companies are forced to consolidate, a move driven by the disposal of non-core assets to raise cash to reduce excess capacity and rationalize facilities.  

"European chemical companies are cautiously optimistic as a result of the current economic climate," adds Dickson. "Many are effectively using strategic growth plans and focusing on better value-added products and less cyclical businesses. These moves will likely help enable companies to be more agile for the future and create prospects for sustainable profitable growth."

China
For the year ahead, the Deloitte reports signals that China's chemical sector will likely continue to grow, but at a slower pace compared to the boom between 2000 and 2009. Structural imbalances evidenced by overcapacity in certain subsectors are factors likely to drive Chinese companies to identify and fill market gaps, as they strategically pursue M&A as a means to raise the future value of a company. 

Overall, organic growth for the industry will likely be modest, enabling M&A to play a prominent role in driving growth in 2013. Global Chemical companies are expected to place a greater focus on realigning their portfolios and investments to capture above average revenue growth and capitalize on new market opportunities.

To download a copy of 2013 Global Chemical Industry Mergers and Acquisitions Outlook, visit https://www.deloitte.com/view/en_GX/global/industries/manufacturing/609c60ac8e4dd310VgnVCM2000003356f70aRCRD.htm.

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence.

DTTL Global Manufacturing Industry group
The DTTL Global Manufacturing Industry group comprises around 2,000 member firm partners and over 13,000 industry professionals in over 45 countries. The group's deep industry knowledge, service line experience, and thought leadership allows them to solve complex business issues with member firm clients in every corner of the globe. Deloitte member firms attract, develop, and retain the very best professionals and instill a set of shared values centered on integrity, value to clients, and commitment to each other and strength from diversity. Deloitte member firms provide professional services to 80 percent of the manufacturing industry companies on the Fortune Global 500®. For more information about the Global Manufacturing Industry group, please visit www.deloitte.com/manufacturing.

[1] Houston Chronicle, "Industry leaders: Domestic oil, gas are driving U.S. manufacturing resurgence," 2 November 2012, http://www.mywesttexas.com/business/oil/article_aa1aaeed-5bd6-585f-ab94-e301a5116721.html.

SOURCE Deloitte Touche Tohmatsu Limited




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