Wave of Assets Hitting the Market: What is the Outlook for European Chemicals M&A in 2025?
-
January 20, 2025
Downloads
Download Dashboard
-
2024 was another difficult year for Chemicals M&A in Europe, with the continuation of the total transaction decline since its peak level of 2021. There was an uptick in the private equity activities, although mostly with add-on acquisitions and limited number of small and mid-size buy-outs. We anticipate an inflow of chemicals assets of various sizes entering the market in 2025, but remain cautiously optimistic about the alignment between buyers and sellers on valuations.
Subdued Market and Misaligned Valuation Expectations in 2024
European chemical M&A remained subdued in 2024, with a fewer number of deals taking place and several processes on hold or postponed until 2025. The challenges faced in this area stem from a persistent misalignment of valuation expectations between buyers and sellers. Longer-than-expected high financing costs in Europe further contributed to the decline in chemical M&A activity – with the peak of activity in 2021 still a long way off.
Figure 1 - Total Number of Investments in European Chemicals (2020 – 2024)
Source: MergerMarket, FTI Consulting analysis
Despite the overall low market activities, the mega-deal between the UAE-based ADNOC and German chemicals producer Covestro was announced in October 2024.1 The question remains whether we will see similar deals in the coming years, considering low valuations in some chemical value chains on one hand, but structural competitiveness challenges of the European industry on the other hand.
International investors continued to explore the sector, including for companies with financial challenges and declining markets in Europe, as exemplified by transactions in the pigments and printing solutions value chains last year with Sudarshan Chemicals announcing acquisition of the Germany-based Heubach Group2 and a consortium between, MAVCO investments, a private investment vehicle belonging to select members of the Murugappa family, and Avenue Capital Group3 announcing acquisition of Germany-based Hubergroup. It is reasonable to expect that some value chains will continue to leave Europe, driven by structurally lower domestic demand and international growth opportunities.
Zooming in on the financial investors, there was an uptick of private equity investments in chemicals in 2024, although primarily through smaller add-on acquisitions to existing portfolio companies, with few buyouts in 2024. This is not unexpected given the smaller deal size might allow to finance with more equity and less debt. The notable announcement was the divestment of Stahl’s wet-end leather chemical business, which has been in the portfolio of Wendel since 2009, to Syntagma Capital.4 There were signs of portfolio pruning activities being activated by large chemical corporations, including smaller carve-outs from BASF5, this trend we believe will intensify in 2025.
Figure 2 - Number of Financial Sponsor-Backed Investments by Deal Type (2014 – 2024)
Source: Preqin, FTI Consulting analysis
The sector has not seen large buyout transactions since 2021, primarily due to the difficult deal-making environment, characterized by high interest rates, but also because of valuation misalignment between buyers and sellers. Buyers struggle to normalize historical earnings due to the industry’s atypical performance following COVID-19 and, more importantly, to gain confidence in its future recovery. Sellers, on the other hand, remained optimistic about the industry’s outlook and the strategic importance of certain assets in Europe.
Figure 3 - Value of Large Buyouts in Chemicals and Accumulated Uncommitted Capital of European PE Funds (2014 – 2024)
Source, Preqin, FTI Consulting analysis
Overall European private equity funds continue to maintain the high level of uncommitted capital, and investors will demand that the capital is spent, which should support M&A activities.
With very limited private equity exits, the holding period of portfolios has grown to an average of six years compared to four in 2020 highlighting investor caution. The longer holding period continues to put pressure on the fund managers to realise the investment through sales or transfer of assets to continuation funds.
Figure 4 - Number of Divestments in Chemicals by Exit Type and Median Buyout Holding Period (2014 – 2024)
One noticeable example of these dynamics is the chemical distribution sector. The last large buyout in this sector happened in 2021, when Advent International acquired Caldic from Goldman Sachs Asset Management.6 That same year, EQT listed another leading distributor, Azelis, on the Euronext Brussels stock exchange;7 Given these market conditions, Cinven decided to put another large chemical distributor, Barentz, which it had acquired in 2019,8 in the continuation fund to fully realise the value creation potential before the right market conditions.
On the other hand, one of the buyouts in 2024 was Deutsche Private Equity’s acquisition of a much smaller chemical distributor, IMPAG, with the expectation of executing a classical valuation creation playbook for chemical distributors, including targeted buy-and-build acquisitions.9
What’s Next? A Wave of Chemical Assets Coming to the Market in 2025
The European chemicals industry is experiencing one of its deepest crises due to weak end-market demand, high energy and feedstock costs and global competition.
These challenging market conditions might lead to the consolidation of certain value chains, particularly those significantly impacted by structural competitiveness issues.
With the impact on financial performance, a number of European chemical companies have announced review of their portfolios to focus on the core capabilities and to streamline operating models, this will bring both small and large size assets to the M&A market.
Figure 5 - Net Returns of MSCI Europe and MSCI Europe Chemicals Index (Dec 2024)
Source: MSCI Europe Chemicals Index Fact Sheet, Dec 2024
With increasing pressure to exit some of its portfolio on one hand and to realize the uncommitted capital on another hand, private equities and other financial sponsors are expected to increase their activities in the sector in 2025.
We believe 2025 will not be defined by a shortage of investment opportunities in the European chemical sector, but rather by the continuing challenge of finding the right asset with a confident outlook for future earnings.
This environment could create opportunities for hands-on private equity funds with operational value creation expertise and willingness to take some risk from large corporates. From performance improvement playbooks to strategic partnerships with industry players, there are a number of routes and approaches that can be explored.
1: Covestro, “Covestro signs an Investment Agreement with ADNOC”, October 2024
2: Sudarshan “Sudarshan Chemical Enters into Definitive Agreement to Acquire Heubach Group”, October 2024
3: Hubergroup “Consortium of MAVCO Investments and Avenue Capital Group Sign Definitive Agreement to Acquire hubergroup in Strategic Move for Global Growth”, November 2024
4: Stahl, “Stahl divests wet-end chemicals business and completes its transformation into pure play speciality coatings company”, November 2024
5: BASF, “BASF closes divestiture of flocculant mining business to Solenis”, November 2024
6: Caldic “Goldman Sachs Asset Management today announced it has reached a conditional agreement to sell Caldic BV (“Caldic”) to Advent International (“Advent”)”, November 2021
7: Euronext, “Azelis lists on Euronext Brussels”
8: Cinven “Cinven to invest in Barentz”, November 2019,
9: IMPAG “IMPAG Group Drives Growth through Strategic Investor Change with Deutsche Private Equity”, July 2024,
Related Insights
Published
January 20, 2025
Key Contacts
Senior Managing Director
Managing Director
Managing Director
Managing Director