KBS - Chemical Manufacturing and Development - Market Insight

FACTORS DRIVING BUYER APPETITE AND DEAL VALUES

In the chemicals sector, we have seen deal values that have been calculated on adjusted EBITDA/earnings multiples ranging from 5/6x to double-digit figures, depending on various factors such as recurring and contracted revenue, vertical specialisation, strategic positioning and scalability.

Key factors that can influence the value have included:

• Healthy sector multiples have been indicative of a flight to quality assets, where companies with resilient margin profiles have commanded high valuations. This has kept sector multiples elevated.

• Chemical firms serving fast-growing end-user industries tend to achieve higher EBITDA multiples. Acquirers pursue targets that supply into industries such as life sciences, pharma and EVs. Similarly, chemical companies enabling battery technology, sustainable packaging or high-tech electronics are drawing premium prices. • Acquirers often place higher valuations on significant synergies or scale benefits in a deal. In chemicals, cost synergies such as combining plants or distribution networks and revenue synergies, e.g. cross-selling products, global market access, can be substantial. • ESG-oriented assets in the chemical sector are commanding higher multiples, driven by both regulatory trends and investor appetite for sustainable businesses. In the UK and Europe especially, deals that further an ESG agenda - for example acquiring a recycler, a bio-based chemicals producer or a firm with low-carbon processes - often see valuation uplifts relative to traditional chemical assets. Strategic acquirers are willing to pay a premium to acquire capabilities that help meet carbon reduction targets or appeal to environmentally conscious customers. Sika’s $6bn purchase of MBCC in 2022 is illustrative, as it was justified in part by the goal of becoming a ‘sustainability champion’ in construction chemicals. With global climate goals, many chemical companies see buying innovative sustainable-tech firms as faster than building in-house, and therefore pay premium prices.