CHEMICAL INDUSTRY MOVING TOWARDS MARKET CONSOLIDATION

1. Healthcare & Life Sciences CHEMICAL INDUSTRY MOVING TOWARDS MARKET CONSOLIDATION

2. “Chemicals is a large, aggressive, and growth-oriented industry. The recent boom in the chemicals sector was fuelled by increased pharmaceutical demand. There is definitely possibility for greater expansion and consolidation in this industry, especially in emerging markets, because there are so many participants.” The chemical industry began to consolidate in the 1990s, affecting developed countries. The emergence of agrichemical companies in India in the 2000s was aided by rising demand. The chemicals industry was dominated by three major businesses by 2014, i.e., Syngenta, Bayer and BASF. In the crop protection industry, these companies controlled 60% of the market. When we talk about segment consolidation, we're talking about increasing market share in the few categories where the player perceives the most value. According to a report by Boston Consulting Group (BCG), the rate of consolidation is quickening, altering several chemical industries as companies seek to focus their portfolios and improve their business models. View For More Information :- https://www.pukkapartners.com/insight/chemical-industry-moving-towards-market-consolidation

3. The degree of consolidation in the various chemical industries now varies significantly. Some agrochemical businesses, for example, are incentivized to merge in order to obtain scale and cut costs. The volume of deals in specialised chemicals is expected to stay strong. Mergers and Acquisitions (M&A) are becoming a difficult business for most businesses in an economy that is negatively fluctuating on a daily basis. And the chemical sector has always engaged in M&As to expand its company and market, adapt its tactics, and bring together all of the segments in which it operates. So, what does this mean for chemical businesses in the face of a collapsing economy that refuses to help them along the way? https://www.pukkapartners.com

5. What Do the Chemical Mergers and Acquisitions Numbers Indicate? Let us study Deloitte in order to understand the importance of chemical mergers and acquisitions number. Deloitte Global's 2020 chemical sector mergers and acquisitions outlooks were mixed, especially when it came to India's chemical industry. Despite a 5% drop in the number of deals in 2018, the numbers are still much higher than in the early 2010s. Chemical M&A is also likely to develop in India, with the chemicals, agro-chemicals, and building chemicals industries leading the way. It is the world's sixth largest chemical provider, accounting for 2.1 percent of GDP. Given rising interest rates and weakening economic growth, these figures are anticipated to fall further in 2019 and 2020. However, given that the underlying factors for chemical industry M&As remain the same – specifically, “ample cash on hand for buyers, the availability of relatively cheap credit, and the desire to increase ROI for investors – this pullback will not be significant. FULL TIME ENGAGEMENT :- https://www.pukkapartners.com/fte Consolidate in order to expand The quantity and value of mergers and acquisitions in the chemicals business has increased at a near-secular rate in recent years. Between 2013 and 2016, the number of deals increased by nearly 20%, with a total deal value of over $230 billion in 2016 compared to around $50 billion in 2013.Dealing with increasing multiples Many huge corporations have used their M&A strategy to successfully outgrow their competitors who have chosen to grow organically. Companies with greater M&A experience are more aware of possible synergies and post-merger integration issues. Attractive assets pique the interest of such purchasers, and we've recently seen an increase in the multiples at which deals in this market have occurred.

6. India's specialised chemical mergers and acquisitions For a variety of reasons, India's specialised chemicals industry is growing, and the country is quickly becoming a key destination for most global MNCs. First, the Indian speciality chemicals market is booming, with demand coming from both domestic and international markets. Specialty chemicals account for almost 20% of the overall Indian chemicals sector ($23 billion) and are expected to increase at an annual rate of 11% to $39 billion by 2021. Second, India is becoming a worldwide manufacturing hub for a variety of sub-segments within specialized chemicals. The organic pigments sector, for example, is seeing most of its manufacturing shift to Asia, mainly India, from Western countries. Given the market's appeal, numerous multinational corporations are considering expanding their presence in India. In India, establishing or expanding through a greenfield project is a time-consuming procedure that necessitates the approval of numerous regulatory/governmental bodies. This is especially true in the case of chemical facilities. As a result, many worldwide organisations in this field seek to grow through acquisitions.

7. Market Competition and the Currency Challenge In today's extremely competitive global market, Indian enterprises' profit margins are narrowing, resulting in a reduction in operating capacity. The extremely strong US dollar is putting downward pressure on chemical demand. Another issue has been the industry's consolidation. For example, the industrial gas industry is still the most fragmented, with five businesses controlling more than 85% of the market. As a result, any new entrant into the market creates a lot of competition – which isn't necessarily a negative thing because it also drives up demand, especially for niche products. The Chemical Industry's Future Two significant themes may have an impact on portfolio restructuring in the industry. The first is a slowing increase in the demand for transportation fuel. The second is a growing emphasis on the circular economy, whether through recycling, regulation, or replacement. Refiners now recognise that chemicals will account for up to 50% of growth in oil demand by 2030, and they are focusing on crude-to-chemicals integration to ensure future growth. This may lead to larger refiners actively looking to increase their chemicals operations without investing in new plants, implying that M&A becomes a favoured option for realigning firms for the future. Sustainability, technology, and large-scale consolidation are all becoming increasingly important factors in determining how acquisitions are made. Trade restrictions, evolving political climates, and regulatory requirements will all play a role in determining how chemical mergers and acquisitions progress.

8. Major Highlights of Global Chemical Industry Disruptions The chemical industry has long had to cope with the inherent risk of its principal feedstock supply coming from the Middle East, so dealing with trade and geopolitical risks is nothing new. However, it appears that some geopolitical events were more acute in 2019, and trade tensions increased. We observed the following in 2019 and early 2020: Trade tensions between China and the United States have risen, with both countries imposing substantial tariffs on a range of chemical products. The attack on Saudi Arabia's oil distribution and refining facilities in September disrupted supplies of critical chemical feedstocks. Quality Circular Polymers, a joint venture between LyondellBasell and SUEZ to turn post-consumer plastic into high-quality polypropylene. Eastman Chemical's collaboration with Circular Polymers to reclaim and recycle post-consumer carpeting into feedstocks for Eastman's products. Outbound M&A by UK corporations was also visible, albeit at a much lower level than in 2018, with deal volumes down by more than half year on year, indicating prudence in the face of Brexit uncertainty. Expanding geographical footprints and increasing exposure to growth end-markets were among the methods used by companies travelling abroad, as were accessing higher-margin products and solving product portfolio gaps. The majority of transactions, as in previous years, were driven by strategic actors seeking to improve or sustain portfolio value by acquiring new skills or divesting noncore assets. German chemical businesses were primarily focused on developing novel, unique technologies that would boost profit and growth in the coming years.

9. Conclusion: A Novel Approach to Chemical Mergers and Acquisitions M&A frameworks, as well as how merger negotiations are approached, must be flexible. Although regulatory requirements are becoming stiffer, slowing the processing of M&As, they are also allowing corporations to follow a more unconventional approach – mostly through carve-outs, asset sharing, asset swapping, and joint ventures. In order to combat the contemporary global commerce market, which is always in flux due to political and social events, flexibility is also essential. This includes a more flexible supply chain, the consolidation of overlapping sectors, and the elimination of production lines that no longer match the future strategy. As is allowing private equity funds to enter the market. While this increases competition, the approach to chemical mergers and acquisitions must become more aggressive in order to survive. Despite a significant shift in the M&A process in the chemical business, the future remains incredibly promising. It's simply changing, and the chemical business must adapt as well. FULL TIME ENGAGEMENT :- https://www.pukkapartners.com/fte

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