Chris Cerimele - Managing Partner, Balmoral Advisors

Chris Cerimele

Managing Partner

Chris Cerimele

Managing Partner

Macro-Economic Outlook: Growth Amidst New Challenges

The U.S. economy  has shown resilience with modest growth in the summer. The inflation-adjusted  positive growth in GDP in Q3 has raised hopes of avoiding a recession (or at least seeing a soft landing). However, new inflationary pressures from conflicts in the Middle East threaten to destabilize economic confidence. This comes as central bankers were beginning to control the price surge caused by the pandemic and geopolitical tensions.

Chemical firms have noted a downturn in business activity and customer demand in Q3, but there is optimism for improvement in the next six months, driven by the industry’s critical role in the supply chain. The trend towards localizing supply chains is also creating significant opportunities for U.S. based chemical companies.(1)

Public Chemical Company Performance: Contrasting Regional Dynamics

Major chemical producers in Europe, including BASF, Covestro, and Lanxess, are facing declining sales and net losses, leading to cost-cutting measures and plant closures. In contrast, the U.S. chemical sector, despite similar challenges, has outperformed its European counterpart over the past two years. Notable exceptions were Dow and Eastman Chemical, which reported drops in Q3 sales and earnings.(2)

Despite these setbacks, the share prices of various chemical companies have remained stable, indicating investor optimism for the industry’s future. The U.S. chemicals industry  has outperformed the S&P 500 in several sectors, demonstrating resilience and potential for growth.

Managing the Current Market Dynamics

  • Slowed Activity: Economic and geopolitical uncertainties have led to a cautious M&A approach, disrupting supply chains and tightening capital markets, as buyers and lenders become more risk-averse.
  • Volatility and Scrutiny: Sellers are facing financial performance volatility due to fluctuating costs and demand, leading to increased due diligence and scrutiny from buyers and lenders.
  • Softened Valuations: Despite historical alignment, valuations have softened amid financial performance fluctuations and heightened market scrutiny, leading to more conservative assessments by buyers.
  • Preparation is Key: Sellers need thorough preparation and a clear understanding of financial trends and market risks to successfully navigate the M&A process.
  • Opportunities Persist: High-quality M&A deals remain attractive, with a focus on strategic fit and long-term value, despite a more cautious market and evolved engagement rules.

Adaptation and Resilience in a Changing Environment

The chemical industry stands at a pivotal point, grappling with economic uncertainties, shifting market demands, and evolving M&A trends. Companies that adapt to these changes and leverage opportunities, such as supply chain localization and strategic divestitures, are well-positioned to thrive in this dynamic environment. The industry’s resilience and potential for growth remain strong, despite the current challenges.

Let’s Talk

To explore the latest developments in the sector’s M&A landscape, share updates about your business, or discover our comprehensive advisory services and in-depth expertise in the chemical industry, please give us a call.


  1. American Chemistry Council 2. C&EN

Related content

Industry Insights
Chemical & Materials02 Feb 2024

In 2023, Chemicals M&A was soft, missing a strong rebound. Deals were selective but of higher quality. For 2024, growth looks promising, driven by sustainability, integration, and transformative deals. Aging equity and decarbonization focus could boost M&A.

Read more

Industry Insights
Chemical & Materials16 Jan 2024

The chemical industry, an essential sector in the global economy, faced a complex macro- economic environment in 2023. A key indicator of this complexity is observed in the M&A trends. After a flurry of transactions, the sector has entered a quieter period with reduced activity.  In Q3 2023, globally the sector saw a decrease to 102 M&A deals, down from 119 in Q2. Despite this decrease, the transaction value (EV/EBITDA) is higher than the average of the previous four quarters suggests a nuanced market scenario.

What does this imply for the industry? Our analysis delves into this question, exploring the macro-economic outlook, public chemical company performance, investor sentiments, and the evolving M&A landscape. It is important to note that our review is based on disclosed information, which, while not exhaustive, offers valuable insights into industry trends.

Read more