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Mergers & Acquisitions


Amid COVID-19, chemical dealmaking slows

Uncertainty is making industry executives cautious about mergers and acquisitions

by Alexander H. Tullo
May 12, 2020

COVID-19 and the ensuing public lockdown have been hitting chemical makers hard, and 2020 will likely be the industry’s worst year since the financial crisis. With so much uncertainty about when the economy will recover, chemical executives and their partners in banking have put mergers and acquisitions on hold.

In the first quarter of 2020, before the US bore the full brunt of the pandemic, dealmaking had been brisk. According to Capstone Headwaters, chemical companies signed 61 transactions during the period, up from the 48 deals struck during the prior year’s first quarter.

Chemical deals
A bar graph of merger and acquisition activity.

The number of mergers and acquisitions in the US chemical industry was up in the first quarter compared with the same period a year ago.
Sources: Capital IQ, PitchBook, FactSet, Capstone Research.

“Despite headwinds, well capitalized strategic and PE [private equity] buyers have continued to pursue M&A deals,” the investment banking firm said in a report. It cited Huntsman’s $300 million agreement in mid-March to buy CVC Thermoset Specialties from the private equity firm American Securities.

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However, in more recent weeks, companies have been pressing the brakes. On May 11, the fertilizer maker OCI said it would delay plans to divest its methanol business in light of COVID-19 uncertainty. It was supposed to make a decision this year but now will wait until 2021, “allowing for an improved transaction environment.”

Similarly, last month Nippon Shokubai delayed its merger with Sanyo Chemical Industries, and SK Global Chemical postponed the close of its purchase of Arkema’s functional polyolefins business. The composites maker Hexcel completely canceled its merger with the aerospace components firm Woodward, citing the novel coronavirus.

“I would say that 90% of the market is on pause right now,” says Chris Cerimele, managing partner of the investment bank Balmoral Advisors.

Cerimele compares the freezing of the M&A market to the “halt to trading” that happens on stock exchanges in emergencies. “It is largely a pullback by buyers, sellers, and lenders because nobody really knows what the near-term performance of most companies is going to be,” he says.

Sometimes, even when a deal is signed, he says, closes are delayed because of logistical challenges. A final walk-through of a facility can’t be completed, for example, or an air permit can’t be secured.

Still, Cerimele predicts that the market will soon start to recover. “By the end of May, you’ll see a few deals kind of tiptoe out and test the waters,” he says.



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