Dealmaking slump will continue in 2021

Merger and acquisition (M&A) activity in the chemical industry has been in a slump, largely because of the pandemic, and momentum isn’t likely to recover until 2022, according to a report from the consulting firm Kearney. Chemical companies inked $125 billion in transactions globally in the first half of 2020, putting the value of deals for the year on track to be down from $318 billion for all of 2019, the report says. But it points out that the 2019 figure was largely the result of two big-ticket transactions—Saudi Aramco’s $69 billion purchase of Sabic and the $55 billion Dow-DuPont split—suggesting that 2019 was also a slow year versus 2018 and 2017. Executives are being conservative about acquisitions, avoiding product line and geographic expansion. “The predominant rationale has shifted back to the less risky approach of consolidation and scale with a focus on exploiting bottom-line synergies,” the report says. A factor worth noting in dealmaking is the circular economy. Chemical companies are “slowly starting to take it up as part of their M&A agendas,” Kearney says.