Chemicals Market Update – July 2025

Chemicals Market Retreats Amid Economic Headwinds, Divestments and Hotspots Keep M&A Afloat

While the U.S. Chemicals market has remained fertile ground for merger and acquisition (M&A) activity—driven by low energy costs and domestic market integration—transaction activity has come under increased pressure, mirroring recent broader industry trends. Commodity players have been squeezed by margin compression, overcapacity, and global competition. Recent U.S. tariffs on imported chemicals, particularly from China, have increased production costs for domestic manufacturers. However, while tariffs pose challenges, they also offer an opportunity for U.S. chemical producers to gain a competitive edge over Chinese counterparts by capitalizing on domestic resources and reducing reliance on imports. Public strategics have looked towards inorganic and organic growth strategies to increase North American production and distribution capabilities to meet increased demand and combat tariff threats. Beyond geographic footprint, sector acquirers have been willing to pay a premium for targets with key end market exposure and strong margin profiles that can shore up supply chains. Businesses serving the Life Sciences, Pharmaceutical, Electric Vehicles (EVs), and Aerospace & Defense segments have rapidly grown, and profitable specialty producers have commanded robust valuations. This demand has driven consolidation in the U.S. Chemicals market as buyers seek to gain access to the region’s established infrastructure, skilled labor, and regulatory frameworks.

Improving visibility on global trade, abundant domestic energy supply and supportive policy provide a constructive backdrop for entrepreneurs, capital flows, and ultimately M&A in the U.S. Chemical market.

Ren NebelManaging Director, Capstone Partners

Chemicals Market M&A Slumps as Economic Turbulence Prompts Portfolio Reviews

Of the M&A transactions being brought to market, divestments and portfolio realignment strategies have been a relative “bright spot” for Chemicals M&A to date. High capital expenditures, cyclical demand fluctuations, and increased competition from regions with lower production costs have contributed to this downturn. M&A volume in the Chemicals sector has weakened through year to date (YTD), with 63 transactions announced or completed compared to 87 during the same period in 2024. Although YTD volume has declined 27.6% year-over-year (YOY), opportunities for M&A remain as larger players have sought to divest struggling or unprofitable segments and buyers look to capitalize on discounted valuations. Shell’s (LSE:SHEL) recent decision to divest its chemical assets in the U.S. and Europe underscores the realignment trends defining the sector in YTD 2025. Shell’s Chemicals division has faced profitability challenges, reporting a $432 million loss to adjusted earnings last year, according to its Q4 2024 and full year unaudited results report.¹ In response, Shell has initiated a strategic review of its chemicals operations, considering the sale of facilities such as the Deer Park plant in Texas and other sites in Pennsylvania, Louisiana, the U.K., Germany, and the Netherlands. By reallocating resources away from underperforming chemical assets, Shell aims to enhance shareholder value and reinforce its position in more profitable operating units. This environment has presented opportunities for corporate buyers and other investors to acquire established assets, potentially leading to increased consolidation and innovation within the sector.

Strategic buyers will likely remain well-positioned to bolster new and existing North American operations and product offerings in the near term via acquisitions of tariff-resilient targets. Strategic acquirers have continued to account for the majority (52.4%) of sector transactions YTD. This cohort has remained relatively stable, falling by one deal YOY to date. Notably, in March, OMV (WBAG:OMW) and Abu Dhabi Oil Co. (ADNOC) announced the merger of their petrochemical joint ventures Borealis and Borouge (ADX:BOROUGE) and its acquisition of NOVA Chemicals for $9.4 billion, equivalent to approximately 7.5x EV/EBITDA on the basis of expected through-the-cycle EBITDA. The deal is expected to form a $60 billion petrochemical business and the fourth-largest global polyolefins producer with a significant North American presence according to S&P Global’s Chemical Week.² Apart from a handful of large-scale deals of foreign buyers entering the North American market, strategics have increasingly targeted lower ($10-100 million) and core ($100-250 million) middle market businesses to bolster capabilities and add complementary products or services without the integration challenges of large-scale, transformational deals. This has impacted total disclosed deal value, which has declined 21.1% YOY. However, average deal values for transactions less than $1 billion have reached $238.5 million in YTD 2025, a slight increase of 4.5% YOY from $228.3 million in the prior year period. Private strategics have pulled away from the space, deterred by current economic volatility and tariff concerns. This cohort of private buyers has accounted for 48.7% fewer transactions YOY through YTD 2025, the main culprit for weakening sector M&A.

Sector M&A valuations have risen YOY, with the average purchase multiple approaching 9.0x EV/EBITDA through YTD 2025 compared to 8.4x EV/EBITDA in the prior year period. However, the average EV/EBITDA multiple in YTD 2025 jumps to 9.6x when excluding deal multiples from divestitures, which draw discounted valuations due to underperformance. Multiples in the Chemicals middle market from 2021 through YTD averaged 10.0x EV/EBITDA and have continuously outperformed the broader Industrials middle market (9.0x EV/EBITDA). Healthy sector multiples have been indicative of a flight to quality assets, where companies with resilient margin profiles have commanded high valuations.

AI Applications in Resilient Life Sciences End Markets Provide Consolidation Opportunities

Chemicals market participants serving Life Sciences end markets—specifically Pharmaceuticals, Biotech, and Diagnostics—have garnered significant acquisition interest and premium valuations due to their stable demand, high-margin profiles, and exposure to long-term growth trends. Investors have been drawn to the sector’s resilience across economic cycles, strong research and development (R&D) pipelines, and the increasing demand for specialized, high-purity inputs. As drug development becomes more complex, these chemical suppliers have been viewed as critical partners, commanding pricing power and long-term contracts. Of note, Agilent Technologies (NYSE:A) acquired Biovectra, a Canada-based contract development and manufacturing organization (CDMO) that specializes in biologics and other molecules for targeted therapeutics, in July 2024 for $925 million, equivalent to 8.2x EV/Revenue. Biovectra recently completed a $90 million expansion increasing vaccine and therapeutic production capacity by 160 million doses per year, and fill/finish capacity by 70 million doses per year, according to a news release.³ This strategic positioning, and those like it, has led to elevated multiples compared to the broader Specialty Chemicals space, making them attractive targets for both strategics and private equity.

Pharmaceutical companies have applied AI to accelerate drug discovery, optimize molecular design, and analyze vast datasets from genomics and clinical trials. Recursion Pharmaceuticals (Nasdaq:RXRX) has emerged as a large pharmaceutical company leveraging AI to accelerate drug discovery and reduce development risk. In August 2024, Recursion acquired Exscientia, a U.K.-based AI drug discovery firm, for $339.8 million and 12.7x EV/Revenue. Exscientia’s AI platform applies deep learning and advanced data analytics to rapidly identify and optimize molecules, cutting the early-stage R&D cycle significantly. The combined company expects to read out approximately 10 clinical trials in the next 18 months, focusing on high-value areas such as oncology and immunology, where drug development is typically long and costly, according to a press release.⁴ By integrating machine learning (ML) and AI into its discovery process, Recursion expects to improve hit rates, lower attrition, and speed time-to-market. This convergence of AI and drug development has fueled M&A, with large pharmaceutical players acquiring biotechnology and specialty chemical firms that offer proprietary platforms, AI-driven R&D, or novel delivery systems—giving them faster access to innovation and pipeline diversification in a competitive therapeutic landscape.

Private Equity Platform Acquisitions Uplift a Rather Muted M&A Backdrop

Private equity has benefitted from chemical companies’ sticky customer relationships and the ability to pass through raw material costs as this enhances earnings visibility—a critical element for future exits. Private equity firms have namely focused on add-on acquisitions (28.6% of deals to date), with an added imperative for portfolio companies providing plastics and specialty chemicals to the Healthcare and Industrials industries. These hot spots offer a high degree of defensibility against inflation and volatile market conditions. Private equity transactions have increased as a proportion of total deals, comprising 47.6% of YTD sector deals, the highest in Capstone’s record as confident deployments of elevated dry powder return to the market. Private equity firms have increasingly established platforms in the Chemicals sector to capitalize on its fragmentation, recurring demand, and pricing power. Platform acquisitions have continued to represent an increasing proportion of sector deal volume—rising to 19.5%, its highest share to date since Capstone began tracking Chemicals M&A volume in 2018. By acquiring a foothold in specialty or performance chemicals—often through a mid-sized, high-margin businesses—firms have been able to build scale through add-on acquisitions, rationalize operations, and expand geographic or end-market reach. Active and new platform investments are expected to drive an influx of sponsor-backed acquisitions amid loosening credit markets, an essential ingredient for an M&A rebound in the sector. Several notable platform transactions in the Chemicals market are highlighted below.

• Gemspring Capital to Acquire Goodyear’s Polymer Chemicals Business (May 2025, $650 Million) – Gemspring Capital announced the acquisition of The Goodyear Tire & Rubber Company’s (Nasdaq:GT) Polymer Chemicals business for an enterprise value of $650 million, valuing business at approximately 0.7x EV/Revenue and 5.0x EV/EBITDA (May 2025). The acquisition includes two operating plants located in Houston and Beaumont, Texas, and a R&D facility located in Akron, Ohio. Goodyear Chemical produces synthetic rubber, offering a broad product portfolio in North America and serving the Automotive Aftermarket space as well as Consumer and Industrial end markets. Gemspring anticipates unlocking the full potential of Goodyear Chemical as a standalone business and will support growth and innovation while Goodyear maintains its assets in Niagara Falls, New York, and Bayport, Texas, and its rights to the products produced at those facilities.

“We are excited to advance Goodyear Chemical’s industry positioning by leveraging our strategic, financial, and industry expertise to continue delivering world-class elastomer technologies and engineered solutions to our customers. As a standalone entity, [Goodyear Chemical] will be well positioned to accelerate product development, expand its relationships with existing and new customers globally, deliver sustainable solutions, continue to invest in its people, and drive growth and innovation through commercial, technical, and operational excellence,” said Tesham Gor, a Gemspring Executive Advisor, in a deal press release.⁵

• Sky Peak Capital Partners Acquires TriStar Plastics (April 2025, Undisclosed) – Sky Peak Capital, a Boston, Massachusetts-based investment firm acquired TriStar Plastics, a provider of engineered plastic solutions and self-lubricating bearings in April (undisclosed). The company delivers a full suite of engineering services, including component design, material selection, prototyping, and production manufacturing. Its proprietary product lines—Rulon®, Ultracomp®, CJ Bearings, and TriSteel™—serve critical sectors such as Aerospace, Defense, Medical, and Food Processing.

“TriStar represents the second platform in our portfolio of enduring industrial partnerships. We continue to be excited about both the organic and M&A growth opportunities in our target markets, particularly with our high-quality, like-minded, and dedicated institutional capital partners behind us. We believe U.S. industrial businesses are poised for a renaissance and Sky Peak is well positioned to be at the forefront of supporting the next chapter of American dynamism,” said Mike Burke, Founder and Managing Partner of Sky Peak Capital, in a deal press release.⁶

• PPC Investment Partners to Acquire Buckman Laboratories International (March 2025, Undisclosed) – In March, Pritzker Private Capital (PPC) announced the acquisition of Buckman, a family-owned innovator in specialty solutions for water treatment and industrial processes for an undisclosed sum. Buckman serves the world’s largest ingredients, chemicals and industrial companies with proven solutions for water processing, paper and packaging recycling, and real-time digital tools to monitor and regulate product dosing. PPC cites Buckman’s global scale, commitment to digital innovation, and an integrated, customer-centric service delivery model as key rationale for the transaction. PPC also acquired Americhem, a manufacturer of custom color masterbatch, performance additive, and engineered compound solutions, which PPC expects to leverage its diversified, long-term base of more than 1,500 customers globally (February 2025, undisclosed), according to a press release.⁷

The U.S. Chemical sector’s favorable conditions, including low energy costs and a strong market presence in the Life Sciences segment, have continued to make it an attractive landscape for M&A activities. Divestitures have become commonplace as sellers look to realign balance sheets and buyers seek discounted assets. Capstone anticipates that companies that successfully navigate the complexities introduced by tariffs, industrial onshoring and global energy market dynamics will be long-term winners.

To discuss the advantages of the domestication and consolidation of supply chains by chemical players, provide an update on your business, or learn about Capstone’s wide range of advisory services and Chemicals market knowledge, please contact us.

Neve Adler, Analyst, was the lead Market Intelligence contributor to this article.

Endnotes

1. Global Newswire, “Shell Plc 4^th Quarter 2024 and Full Year Unaudited Results,” https://www.globenewswire.com/news-release/2025/01/30/3017728/0/en/SHELL-PLC-4th-QUARTER-2024-AND-FULL-YEAR-UNAUDITED-RESULTS.html, accessed June 6, 2025.

2. Chemicals Week, “Borealis, Borouge, Nova to Merge into Polyolefins Powerhouse,” https://chemweek.mydigitalpublication.com/articles/borealis-borouge-nova-to-merge-into-polyolefins-powerhouse, accessed June 6, 2025.

3. Genetic Engineering & Biotechnology News, “Agilent to Acquire Biovectra for $925M, Expanding CDMO Portfolio,” https://www.genengnews.com/topics/bioprocessing/agilent-to-acquire-biovectra-for-925m-expanding-cdmo-portfolio/, accessed June 6, 2025.

4. Recursion, “Recursion and Exscientia Enter Definitive Agreement to Create a Global Technology-Enabled Drug Discovery Leader with End-to-End Capabilities,” https://ir.recursion.com/news-releases/news-release-details/recursion-and-exscientia-enter-definitive-agreement-create, accessed June 6, 2025.

5. Gemspring, “Gemspring Capital to Acquire Goodyear Chemical,” https://www.gemspring.com/gemspring-capital-to-acquire-goodyear-chemical/, accessed June 6, 2025.

6. Sky Peak Capital, “Sky Peak Capital Announces its Latest Partnership with the Acquisition of TriStar Plastics,” https://www.skypeakcap.com/blog/2025/04/29/sky-peak-capital-announces-its-latest-partnership-with-the-acquisition-of-tristar-plastics/, accessed June 6, 2025.

7. Pritzker Private Capital, “Pritzker Private Capital Agrees to Acquire Buckman,” https://www.ppcpartners.com/news, accessed June 6, 2025.