Chris Cerimele - Managing Partner, Balmoral Advisors

Chris Cerimele

Managing Partner

Chris Cerimele

Managing Partner

Activity in the U.S. chemicals industry dropped in Q2 2023 but the deal valuations remain globally competitive due to availability of capital with PE firms and strategic buyers.

In Q2 2023, a total of 119 M&A deals were completed in the chemicals industry, representing a decline of 24% compared to the first quarter of 2023 (157 deals). Commodity chemicals led the industry in terms of transaction volume (55 deals), transacting at an average disclosed EV/EBITDA multiple of 6.0x. When examining the trailing twelve-month performance of the chemicals industry in comparison to the S&P 500, chemical distribution outperformed the S&P 500, returning 49.9%, against the S&P’s return of 16.3%.

Chemical production is expected to expand by 0.6% in 2023 with gains in Asia/Pacific, Africa & Middle East, and former Soviet Union countries offsetting production declines in Europe, North America, and Latin America(2). According to the American Chemistry Council (ACC), China’s post-zero-Covid recovery has been slow and Europe continues to struggle with disruptions from Russia’s invasion of Ukraine. Economic expansion in emerging Asia/Pacific (especially India) will offset weaker GDP growth in Europe, Japan, and North and South America. We expect global economic growth to ease to a 2.3% pace in 2023(1).

Going into the second half of the year, inventory destocking has largely been resolved, but signs of customer restocking are yet to materialize. Firms throughout the supply chain are cautiously managing their inventories given the uncertain economic environment(2). The U.S. Chemical Production Regional Index (CPRI) rose 0.5% in April 2023. Global CPRI rose by 0.4% in April 2023(2).

Several notable transactions were completed in the second quarter of 2023. Koninklijke DSM NV (ENXTAM:DSM) acquired Firmenich International SA for ~$20.6 billion, Advent International Corporation and LANXESS Aktiengesellschaft (XTRA:LXS) purchased the engineering materials business of Royal DSM from Koninklijke DSM NV (ENXTAM:DSM), Inc. for nearly ~$4 billion.

For chemical exports, the stronger dollar has hampered shipments. Still, the U.S. has a cost advantage against foreign producers, and energy fundamentals favor U.S. production, on the heels of a record year in 2022. Capital spending in the chemicals industry will slow down in 2023, and will shift towards lowering greenhouse gas emissions and chemical recycling(3). More than 85% of basic and specialty chemicals are consumed by the industrial sector and the outlook for industrial production remains weak. The ACC expects overall industrial production to fall 0.6% this year with only four of the 18 key end-use markets they track to expand in 2023. In 2024, production continues to ease by 0.4% before rebounding in 2025(1).

As central banks signal a shift towards a more accommodative stance, strategic buyers and mega PE firms have come back to the table to take advantage of attractive valuations and cash on hand. The loosening of monetary policy, if it materializes, is expected to stimulate economic growth and bolster market confidence, creating a conducive environment for chemicals M&A activity in the near- to medium-term(4).

Looking ahead, we expect the chemicals M&A market to gain momentum in the second half of 2023, driven by continued demand for transformative deals, cross-border collaborations, and the pursuit of sustainable solutions to address environmental challenges(4), especially in the middle market where we operate.


  1. ACC-Mid Year Outlook. 2. ACC- Chemical Production. 3. ICIS- Outlook ’23. 4. PWC – Chemicals: US Deals 2023 midyear.

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