Divergence Emerges in European Chemical Industry M&A Activities

Following strategic reviews, bulk chemical assets have largely been shut down, while specialty chemicals remain highly favored

In recent years, strategic reviews have become commonplace in Europe's petrochemical industry. Recently, giants such as Dow, BASF, LyondellBasell, SABIC, and Shell have conducted strategic assessments of their major petrochemical assets in Europe. These reviews frequently result in the closure of one or more production facilities. However, market observers note a divergence in the merger and acquisition trends between bulk and specialty chemicals: bulk chemical assets are often forced to be shut down or divested, whereas specialty chemical assets continue to attract strong market interest.

A June report by Roland Berger stated that high energy costs, economic downturns, and low-cost imports from Asia are eroding the profitability of European bulk chemical companies, placing immense pressure on their performance, forcing them to sell off related assets to survive. At the same time, Andy O'Shea, Director of Ethylene and Derivatives at S&P Global Commodity Insights, pointed out: "Assets performing adequately locally in Europe may lack global competitiveness." This dilemma—where bulk chemical assets are difficult to sell—makes companies more inclined to shut them down rather than find buyers.

Recently, LyondellBasell sold four olefins and polyolefins production sites in Berre (France), Münchsmünster (Germany), Carrington (UK), and Tarragona (Spain) to private equity firm Aequita SE & Co. KGaA. Unusually, LyondellBasell and Aequita contributed €265 million and €10 million respectively in the deal, creating a so-called "reverse payment." The transaction has sparked controversy within the industry. KeyBanc analyst Alexei Efremov believes this indicates an oversupply situation in the olefins sector that could persist for years, prompting companies to shed underperforming assets through unconventional means. Bruce Greer, President of GBG Jr Advisors, noted that weak demand for bulk chemicals in Europe combined with high interest rates makes integrating these assets risky due to debt burdens, explaining such abnormal deals.

O'Shea said that from the perspective of private equity firms, bulk chemicals is seen as a distressed sector, where original owners are selling potentially more valuable assets at market lows. However, whether these assets truly hold potential depends on growth in Europe’s chemical industry. Given persistent weak demand and high energy costs, growth in the bulk chemicals market may not arrive soon.

For buyers, some bulk chemical assets still present market opportunities. Neil Gosch of Truist Securities believes bulk chemical businesses with low energy intensity and those dependent on markets outside Europe are more likely to attract buyers. For example, Shell plans to sell its Monaca cracker in Pennsylvania, USA, along with its European assets, possibly as a bundled deal, and traders might participate in acquisitions, especially for highly integrated assets. Last year, Shell sold its refining and petrochemical facilities on Pulau Bukom and Jurong Island in Singapore to a joint venture formed by Glencore and Indonesian chemical manufacturer PT Chandra Asri Pacific.

Middle Eastern capital continues to closely monitor Europe’s chemical M&A market. ADNOC acquired Covestro for €14.7 billion, and Borouge and Nova Chemicals received EU approval on July 7 to merge into the world’s fourth-largest polyolefins producer. According to Kearney, Middle Eastern companies focus on entering new overseas markets through acquisitions, while another goal is gaining access to technology and expertise in specialty chemicals.

In contrast to bulk chemicals, specialty chemical assets remain highly attractive. There have recently been numerous Europe-focused transactions in the specialty chemicals space, including Johnson Matthey’s catalyst business and smaller deals. BASF’s coatings business has triggered fierce bidding competition among private equity and strategic buyers. According to Bloomberg, Carlyle Group and Sherwin-Williams are considering a joint bid for BASF’s coatings division, while two other private equity firms, CVC Capital Partners PLC and Lone Star Funds LLC, also show interest. BASF already sold its decorative paints business in Brazil for $1.15 billion in February 2025 and plans to divest its remaining coatings operations.

Kearney partner Andrea Menegazzo said specialty chemicals offer global advantages, high R&D investment, and localized customization capabilities that reduce risks in European supply chains. Recent activity in Europe’s specialty chemicals sector includes deals involving Johnson Matthey’s catalyst business and Radici’s Italian polymer business. Private equity funds are familiar with specialty chemicals, and past successful cases have fueled M&A enthusiasm. Neil Gosch stated: “Specialty chemical assets possess stronger competitive advantages globally.”