Chemicals M&A Update – November 2024

Chemicals M&A Receives Boost as Sales Volumes Return

Capstone’s latest Chemicals Industry Update reports that merger and acquisition (M&A) activity year to date (YTD) in the space has rebounded amid continued pressures on input prices, driven by ongoing geopolitical and broader economic uncertainties. However, the sector has seen a steady quarter-over-quarter (QoQ) recovery in sales volumes as destocking subsides.

This trend has suggested that while pricing remains tough, manufacturers have found ways to stabilize costs through strategic adjustments that capitalize on gradual demand improvements. Of note, Brenntag (XTRA:BNR) has been vocal in its attempt to rein in costs to promote greater efficiencies. As a result, Brenntag has announced five transactions for a total enterprise value of ~$374 million since the beginning of 2024, according to its Q2 earnings call.¹ Strategic portfolio reviews, divestitures, and consolidation have characterized recent M&A activity. Notably, BASF’s sale of its Flocculants business to Solenis (July, undisclosed) and UFP Technologies’ (Nasdaq:UFPT) acquisition of Welch Fluorocarbon (July, $34.6 million, 2.7x EV/Revenue, 11.5x EV/EBITDA) have signaled continued consolidation and specialization within the Chemicals space. These moves have reflected how major players have positioned themselves to capitalize on the expanding applications of chemicals, particularly in high-growth industries.

Specialty Chemicals demand has remained robust in the Engineering and Semiconductor industries despite price fluctuations. Specifically, niche and essential specialty chemicals categories such as Fluorochemicals and Fluoropolymers have been key beneficiaries of the demand growth in these industries. These product categories deliver high performance including thermal stability, chemical resistance, low surface energy, and play a mission-critical role in advanced engineering and semiconductor manufacturing. Notably, the global Semiconductor market is forecasted to grow 16% in 2024 to reach $611 billion, according to a report by the World Semiconductor Trade Statistics (WSTS).² The Americas are projected to see the highest growth (25.1%) as demand for semiconductors surges.

Other notable deals in the sector include Apollo Global Management’s (NYSE:APO) April acquisition of U.S. Silica (NYSE:SLCA) for $1.9 billion, equivalent to 1.3x EV/Revenue and 4.7x EV/EBITDA. U.S. Silica is an industrial silica and diversified minerals producer serving the Oil & Gas industry. U.S. Silica will continue operating under its brand and will maintain its current executive team. The deal is expected to enhance U.S. Silica’s operational strategies and market expansion. Under Apollo’s ownership, U.S. Silica will have increased access to capital, which can be used to drive innovation and improve its operational efficiencies. EP Minerals and SandBox Logistics, along with other U.S. Silica subsidiaries, are likely to benefit from Apollo’s expertise, enabling the company to expand its reach in industrial applications beyond oil and gas. With this transaction, the Chemicals sector has gained a leading global asset management fund that has committed significant capital and resources to pursue strategic market opportunities and invest in innovative capabilities. A deal of this nature is expected to result in more aggressive expansion into new markets and potential acquisitions within the Specialty Chemicals space.

Also included in this report:

• Why the U.S. has continued to be a valuable geography for Chemicals M&A.
• A breakdown on what upper middle market players have targeted in the Specialty Chemicals space, and how a softening credit market has primed the market for future activity.
• How advancements in artificial intelligence (AI), fifth-generation (5G) technology, and electric vehicles (EVs) have bolstered demand for niche categories

Capstone Partners’ Industrials Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the Chemicals sector. Our team partners with leading mid-to-large sized industrials and manufacturing businesses that serve growing end-markets. We ultimately look to work with companies that manufacture highly engineered products and differentiated services with an entrenched competitive position.

For more information on the Specialty Chemicals M&A Update featured in this report or to speak with one of our Industrials M&A Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.