KBS - Chemical Manufacturing and Development - Market Insight

CURRENT TRENDS • Many firms have shifted focus to the pursuit of smaller acquisitions or bolt-on opportunities, rather than transformational deals, with economic uncertainty, tariff changes and interest rates all contributing to this. Notably, eight of the top 15 deals in 2023 were driven by consolidation or vertical integration motives for scale and supply-chain resilience. • M&A in the chemicals industry tends to follow sub-sector themes. After years of diversifying by large multinationals, there is a countertrend of portfolio focus and segment level consolidation. For example, recent years saw deal activity in agrochemicals, coatings and pigments, followed by a rise in deals for flavours, fragrances, cosmetics and personal care. Firms will continue to acquire with the aim of becoming leaders in particular sub-sectors, seeking synergies and consolidating their diversified portfolios. • Innovation and technology are key drivers for M&A in the chemicals industry. Recent transactions have been catalysed by the need for new capabilities, such as speciality chemical firms buying tech start-ups or labs to gain proprietary processes, advanced materials or AI-driven research platforms. In 2023, a notable number of deals were motivated by access to new IP, patents and R&D talent in chemicals. Larger companies, for example Recursion’s acquisition of Exscientia, have acquired AI-focused drug and materials discovery firms.

In 2022, the value of chemicals exported by the UK to the United States amounted to nearly $12bn, making the US the UK’s largest trade partner for chemical exports.