Mar 2, 2022

Specialty Chemicals Market M&A Update – March 2022

Chemicals Market

Specialty Chemicals Market Remains Vibrant Despite Supply Chain Disruptions

The Specialty Chemicals subsector has largely recovered from the height of the pandemic as elevated consumption has fueled construction and manufacturing activity, driving demand for chemical inputs. Consumption is expected to remain high in the near term, due to pent-up demand, substantial savings, and briskly rising wages. Notably, personal consumption expenditures reached an all-time monthly high of $16.4 trillion in November 2021, increasing 13.5% year-over-year (YOY), according to the U.S. Bureau of Economic Analysis.1 Manufacturers have increased production to meet the unprecedented demand as evidenced by the industrial production index (a measure of real output for all facilities in the U.S. involved in manufacturing, mining, electric, and gas utilities) returning to pre-pandemic levels and recording an increase of 3.6% YOY, reaching 101.9 in December 2021 (2017=100), according to the Board of Governors of the Federal Reserve System.2 Likewise, chemical providers serving the Construction industry have benefited from elevated consumer spending, evidenced by contractor expectations for increased sales, profit margins, and staffing levels over the next six months, according to Associated Builders and Contractors.3 Although the ongoing pandemic and rising inflation will continue to challenge chemical companies, the Specialty Chemicals segment is expected to continue to see robust demand and M&A interest throughout 2022.

Supply Chain Strength and Operational Efficiency Continue to be Key Focus Points

In the near term, sector growth will be limited by supply chain disruptions and logistics issues surrounding receiving and shipping raw materials. Along with reducing overall production, supply chain disruptions have culminated in raw material price increases. However, leading specialty chemicals providers including Huntsman Corporation (NYSE:HUN), Cabot Corporation (NYSE:CBT), and Ashland Global Holdings (NYSE:ASH) have been able to pass inflated raw material costs onto the consumer by increasing product prices to prevent margin leakage, according to each company’s most recent earnings calls.4,5,6 For distributors, volatile prices will pass on some risk to operators that must be adept and deliberate in supply contract negotiations. Volatile raw material costs are anticipated to fuel consolidation activity as companies attempt to cut costs and improve operating flexibility through vertical and horizontal integration. Notably, in Capstone’s Middle Market Business Owners Survey supply chain disruptions continued to be the foremost issue faced by business owners in Q3 (47.3%). Of the business owners that reported experiencing supply chain issues, nearly 80% experienced rising input prices (an increase of 20% from the previous quarter).

Chemical manufacturers that utilize petrochemical-based raw materials have particularly struggled due to considerable oil price volatility. Constrained production has made it difficult for the U.S. to replenish feedstocks, resins, and intermediates after pandemic-related shutdowns and the Texas Big Freeze. Amid an already tight oil supply, sanctions against Russia following its February invasion of Ukraine drove the price of West Texas Intermediate (WTI) Crude Oil to its highest level since 2014, above $100/bbl (barrel), according to The Wall Street Journal.7 Further constricted supplies of Russian commodities threatened to drive feedstock inflation even higher as Russia is the single biggest gas exporter and a major supplier of crude oil. However, the U.S. and the International Energy Agency (IEA) reached an agreement to release 60 million barrels of oil from emergency stockpiles in order to send “a unified and strong message to Global Oil markets that there will be no shortfall in supplies as a result of Russia’s invasion of Ukraine,” according to the IEA.8

Favorable Outlook for Plastics and Resins, Antimicrobials, and Biocides

At the onset of the pandemic, sector performance was bifurcated as categories including Plastics and Resins suffered from lower demand in markets such as Automotive, Construction, and Manufacturing; while sector players serving Disinfectant and Sanitizer categories, including biocide manufacturers and distributors, benefited from rising consumer awareness surrounding hygiene and cleanliness. In 2022, Specialty Chemicals, including plastics and resins have recovered from the economic downturn in accordance with the rise of manufacturing activity in key end markets. Notably, automotive parts production, which relies upon plastics and resins inputs, is higher today than at any point in U.S. history, yet still unable to meet demand, according to Specialty Equipment Market Association (SEMA).9 Plastics demand in the Automotive Parts sector is expected to be supplemented by the transformation from heavier metal parts to lighter auto parts, as cars aim to increase energy efficiency. Plastics and resins providers are also poised to benefit from rising construction activity.

Many specialty chemical categories that thrived at the onset of the pandemic have experienced sustained demand as heightened consumer awareness regarding hygiene and cleanliness has proven to be sticky. Disinfectant and sanitizer categories are projected to continue to capture elevated demand as consumers have permanently adopted cleaner, healthier lifestyles amid the ongoing pandemic. Benefiting from the same tailwind, antimicrobial products and microbial control solutions (MCS), which prevent the growth of micro-organisms across a wide breadth of industries, are expected to continue to record strong growth. Microbial control solutions can be used in applications including meat and poultry disinfection, fruit and vegetable washing, water and wastewater treatment, wood protection, hygiene, material protection and hygiene, coatings, crop protection, and much more. Biocide, Antimicrobial, and Microbial Control Solution categories are expected to experience growing demand and M&A activity due to the hygiene megatrend and the wide breadth of serviceable end markets.

M&A Surges as Specialty Chemicals Market Players Expand Core Capabilities and Divest Non-core Assets

The overall M&A market recorded a banner year in 2021 fueled by a favorable deal-making environment comprised of pent-up acquirer demand, low interest rates, and premium valuations for high-quality assets. The Chemicals sector was particularly exuberant, rising 70% YOY to reach a record quantity of deals fueled by divestitures, as businesses quickly shed non-core assets in the wake of COVID-19 to focus on core businesses, and strategics (which accounted for 67.4% of activity) consolidating competitors in attractive geographies to gain exposure to growth dynamics. Several blockbuster strategic deals occurred across the Chemicals sector in 2022, demonstrating that large companies have regained balance sheet strength and have sought to deploy capital in inorganic growth opportunities within their companies’ core focus. Financial buyers remained relatively active, led by add-on acquisitions (22.8% of total activity) as private equity firms utilized acquisitions to consolidate competitors with complementary capabilities to enhance scale and market share.

Amid the challenges in the 2021 environment driving elevated raw material and transportation costs, M&A activity in the Chemicals and Plastics sector rebounded solidly from 2020. Strong operating cash flows, demand tailwinds, and a robust financing environment are expected to drive continued activity into 2022.

Doug UsiferManaging Director, Capstone Partners

Recent Capstone Partners Advised Transactions

Capstone Partners maintains an active Industrials & Manufacturing practice in the middle market, with Chemicals being an important vertical within our focus. This market presence allows Capstone to provide chemical companies with up-to-date market data and access to key decision makers among the sector's most active acquirers and investors. Below are recent transactions that Capstone advised in the sector.

  • Arxada acquires Enviro Tech Chemicals (December 2021, Confidential) - Capstone Partners advised Enviro Tech Chemical Services, Inc. on its sale to Arxada AG, a portfolio company of Bain Capital and Cinven in December. Enviro Tech Chemical Services, Inc., based in Modesto, CA, is a category-leading manufacturer and supplier of high-efficacy, environmentally friendly antimicrobial and biocidal products. Enviro Tech partners with distributors to provide a complete line of EPA and FDA-approved products for a variety of industries including industrial water treatment, meat & poultry disinfection, fruit & vegetable processing, agriculture water, animal health, produced & frac water treatment, municipal wastewater treatment, and more. Enviro Tech holds a broad portfolio of intellectual property including 41 EPA registrations, 15 FDA Food Contact Notifications, and 14 U.S. patents. Read about the transaction here.
  • SK Capital acquires Deltech Holdings' Monomers, Polymers, and European Businesses (August 2021, Confidential) - Capstone Partners advised Deltech Holdings LLC, a producer of enhanced performance aromatic monomers and performance polymers, on the sale of its Monomers, Polymers, and European Businesses to SK Capital in August. Deltech operates production units in Baton Rouge, LA to manufacture methyl styrene and other specialty aromatic monomers, a plant in Dayton, OH which manufactures polystyrene, and European manufacturing operations. Deltech began operations in 1988 producing PMS (para-methylstyrene) using a process licensed only to Deltech. In 1992, the plant was expanded to allow production of the complementary methyl styrene product, VT (vinyl toluene). PMS contains 95% para isomer while VT is a mixture of the meta and para isomers. Methyl styrene monomers provide improved performance in resins and plastics for specialty paints, hydrocarbon resins for adhesives, specialty polymers and unsaturated polyester resins. Read about the transaction here.

The Enviro Tech and Deltech deals illustrate the strong Chemicals & Plastics M&A environment. Companies that are on-trend, have strong IP and know-how in the sector, and deliver superior service, performance, and end-customer benefits will command significant attention and valuation.

Doug UsiferManaging Director, Capstone Partners

Banner Deals Occurred in 2021 as Large Players Reassessed Portfolios

Several blockbuster deals occurred across the Chemicals sector in 2021, with large companies reassessing portfolio holdings and pursuing acquisitions to bolster core capabilities. Below are three significant Chemicals deals that occurred in Q4 2021, followed by a handful of other recent, notable transactions.

  • Entegris to acquire CMC Materials (December 2021, $6.5 Billion) –Entegris (Nasdaw:ENTG) entered a definitive merger agreement to acquire CMC Materials (Nasdaq:CCMP) in a cash and stock transaction at an enterprise value of $6.5 billion, equivalent to 5.5x last-twelve-months (LTM) revenue, or 18.4x LTM EBITDA. Based in Aurora, Illinois, CMC Materials is a global provider of specialty materials to semiconductor manufacturers. Under the terms of the agreement, CMC Materials’ shareholders will receive $133 in cash and 0.4506 shares of Entegris common stock for each share of CMC Materials common stock they own, according to a press release.10 The total per share consideration represents a 35% premium over CMC Materials’ closing price on December 14, 2021. Entegris shareholders will own ~91% of the combined company and CMC Materials shareholders will own ~9%.

Headquartered in Billerica, Massachusetts, Entegris is a manufacturer and supplier of microcontamination control products, specialty chemicals, and advanced material handling solutions primarily serving the Semiconductor sector. Through the acquisition of CMC Materials, Entegris has expanded its served markets in the Semiconductor Applications subsector to approximately $12 billion and increased its unit-driven revenue from 70% to approximately 80%. The transaction is expected to be significantly accretive to non-GAAP earnings per share (EPS) within the first year of closing. Within 12-18 months of closing, Entegris expects to realize $75 million in run-rate cost synergies and $40 million in capital expenditure synergies. With approximately $1.1 billion in adjusted EBITDA on a pro forma LTM basis including synergies, Entegris will be well-positioned to rapidly reduce its leverage to less than 3.0x, while investing in growth opportunities and continuing its dividend policy for Entegris and CMC Materials shareholders. In addition, Entegris expects to drive meaningful revenue synergies through co-optimized solutions, cross-selling opportunities, and stronger customer response and collaboration. The acquisition also enables Entegris to meet evolving customer demand through enhanced commercial, operational, and research and development (R&D) capabilities, as device architectures continue to become more complex.

  • Ecolab acquires Purolite (December 2021, $3.7 Billion) – Ecolab (NYSE:ECL) acquired Purolite for $3.7 billion. Purolite is a leading provider of high-end ion exchange resins for separation and purification solutions, serving Pharmaceutical and Industrial end markets. Upon closing of the deal, Purolite will operate as a separate global business unit and its overall results will be reported within Ecolab’s Life Sciences division, according to a press release.11

Based in Saint Paul, Minnesota, Ecolab produces cleaning and sanitation products for the Hospitality, Healthcare, and Industrial markets. Through the acquisition, Ecolab will benefit from a market-leading position in the $5 billion Global Fluid Separation and Purification market, as well as Purolite’s double-digit growth in the Biopharma market, and high single-digit growth in Industrial markets. The deal doubles Ecolab’s existing high-margin Life Sciences business while adding new capabilities and opportunities in Industrials segments. The acquisition also strengthens Ecolab’s position as the market leader in the High-end Ion Exchange Resins market by nearly $0.4 billion, with approximately 95% consumable revenue products for purification solutions critical to customer operations.

  • DuPont de Nemours to acquire Rogers Corporation (November 2021, $5.2 Billion) –Diversified specialty chemicals company DuPont de Nemours (NYSE:DD) has entered into a definitive merger agreement to acquire Rogers Corporation (NYSE:ROG) in an all-cash transaction that values Rogers at $5.2 billion, equivalent to 5.5x LTM revenue or 23.4x LTM EBITDA. Under the terms of the agreement, Rogers’ shareholders will receive $277 in cash per share, representing a 33% premium over Rogers’ closing share price on November 1, 2021.

Rogers Corporation manufactures and sells engineered materials and components worldwide. Upon closing of the deal, Rogers will be integrated into DuPont’s Electronics & Industrial business unit. In addition to providing scale, the transaction will help accelerate Rogers’ long-term growth in Electric Vehicle/Hybrid Electric Vehicle (EV/HEV), Advanced Driver Assistance Systems (ADAS), and other key markets, according to a press release.12

To discuss sector M&A activity, provide an update on your business, or learn about Capstone's wide range of advisory services and Chemicals sector expertise, please contact Doug Usifer


  1. U.S. Bureau of Economic Analysis, “Consumer Spending,”, accessed January 25, 2022.
  2. Board of Governors of the Federal Reserve System, “Industrial Production and Capacity Utilization – G.17,”, accessed January 25, 2022.
  3. Associated Builders and Contractors, “ABC’s Construction Backlog Slips in December; Contractor Confidence Continues to Improve,”, accessed January 25, 2022.
  4. The Motley Fool, “Huntsman Corporation (HUN) Q3 2021 Earnings Call Transcript,”, accessed February 1, 2022.
  5. The Motley Fool, “Cabot (CBT) Q1 2022 Earnings Call Transcript,”, accessed February 1, 2022.
  6. Seeking Alpha, “Ashland Global Holdings, Inc. (ASH) CEO Guillermo Novo on Q4 2021 Results – Earnings Call Transcript,”, accessed February 1, 2022.
  7. The Wall Street Journal, “U.S., IEA Agree to Release 60 Million Barrels From Oil Stockpiles Amid Ukraine Turmoil,”, accessed March 1, 2022.
  8. IEA, “IEA Member Countries to make 60 million barrels of oil available following Russia’s invasion of Ukraine,”, accessed March 1, 2022.
  9. SEMA Market Research, “SEMA Future Trends – January 2022,”|utmccn=(organic)|utmcmd=organic|utmctr=(not%20provided)&__utmv=-&__utmk=235616329, accessed January 27, 2022.
  10. Entegris, “Entegris to Acquire CMC Materials to Create a Leader in Electronic Materials,”, accessed February 2, 2022.
  11. Ecolab, “Ecolab to Acquire Purolite, a Leading Global Provider of Fast-Growing, high Value Separation and Purification Solutions to Life Sciences and Critical Industrial Markets,”, accessed February 3, 2022.
  12. Rogers Corporation, “DuPont Announces Acquisition of Rogers Corporation,”, accessed February 2, 2022.

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