Market insight – The chemical industry

Chemicals and pharmaceuticals is one of the largest industries in the UK – and since the second quarter of 2023, M&A deal value in this sector has been steadily climbing.

With market conditions and interest rates having stabilised, 148 global deals in the speciality chemicals sector were completed in the second half of 2024 – nine more than the long-term average. Total deal value for H2 2024 reached $13.9bn, representing a 113% increase from H1 2024.

H2 2024 also saw an uptick in high-value transactions. Although smaller deals of less than £75m were the most prominent, the rise in deal values indicates companies and investors are committing to larger investments into the chemical industry. 

That trend has continued throughout 2025. UK companies with niche specialities are attractive targets for international buyers, while UK-based private equity remains very active in the mid-market.

The Chemical Industries Association in the UK has highlighted the need for investment to meet net-zero targets, which is translating into both M&A and joint ventures. Moreover, cross-border deals are expected to rise as overseas buyers seek footholds in the UK’s speciality chemicals such as lithium, and battery material start-ups.

Factors driving growth

Specialisation: A driver of growth in the chemical industry is the innovation and specialisation offered by firms.

UK companies have been investing significantly in R&D, which has led to world-leading specialisations. For example, catalysts (Johnson Matthey), speciality surfactants and personal care active ingredients (Croda), advanced composite materials, and cutting-edge biotech applications.

Technology: Adoption of digitisation, AI, IoT technologies and Industry 4.0 frameworks is transforming the chemical sector.

Companies are finding novel compounds faster, which accelerates product launches and opens new revenue streams.

Sustainability: Environmental and sustainability factors are propelling growth, by way of opening new markets and attracting investment. The push for net-zero and greener products means chemical companies are developing and selling more bio-based and sustainable chemicals.

Globally, there is rising demand for biopolymers, biodegradable packaging and sustainable ingredients. UK firms are at the forefront in these sub-sectors.

Current acquisition trends

• Many firms have shifted focus to the pursuit of smaller acquisitions or bolt-on opportunities, rather than transformational deals, with economic uncertainty, tariff changes and interest rates all contributing to this.

• M&A in the chemicals industry tends to follow sub-sector themes. For example, recent years saw deal activity in agrochemicals, coatings and pigments, followed by a rise in deals for flavours, fragrances, cosmetics and personal care.

• Innovation and technology are key drivers for M&A in the chemicals industry. Recent transactions have been catalysed by the need for new capabilities, such as speciality chemical firms buying tech start-ups or labs to gain proprietary processes, advanced materials or AI-driven research platforms.

Key drivers and motivations for acquirers

Trade buyers have been acquiring mid-sized speciality chemical players with strong IP, loyal customer bases and advanced R&D capabilities.

There has been a focus on high value and cross-border acquisitions across Europe and the US since 2024.

Firms are looking to develop sustainability through acquisitions, for example by improving their formulations or by introducing low-carbon manufacturing. Moreover, companies which leverage digital tools for production efficiency, supply chain resilience or customer personalisation often receive higher valuations.

Finally, acquirers aim to vertically integrate, controlling more of their supply chains and routes to markets.

Factors driving buyer appetite and deal values

In the chemicals sector, we have seen deal values that have been calculated on adjusted EBITDA/earnings multiples ranging from 5/6x to double-digit figures, depending on various factors such as recurring and contracted revenue, vertical specialisation, strategic positioning and scalability.

Key factors that can influence the value have included:

• Healthy sector multiples have been indicative of a flight to quality assets, where companies with resilient margin profiles have commanded high valuations. This has kept sector multiples elevated.

• Chemical firms serving fast-growing end-user industries tend to achieve higher EBITDA multiples. Acquirers pursue targets that supply into industries such as life sciences, pharma and EVs. Similarly, chemical companies enabling battery technology, sustainable packaging or high-tech electronics are drawing premium prices.

• Acquirers often place higher valuations on significant synergies or scale benefits in a deal. In chemicals, cost synergies such as combining plants or distribution networks and revenue synergies, e.g. cross-selling products, global market access, can be substantial.

• ESG-oriented assets in the chemical sector are commanding higher multiples, driven by both regulatory trends and investor appetite for sustainable businesses. In the UK and Europe especially, deals that further an ESG agenda – for example acquiring a recycler, a bio-based chemicals producer or a firm with low-carbon processes – often see valuation uplifts relative to traditional chemical assets.

M&A interest from acquirers and investment routes

Private equity has been heavily investing in high-growth sub-sectors of the chemicals industry, such as speciality chemicals. PE is drawn to these types of companies due to their tailored offerings – end users are often in diverse, high-growth end markets and yield higher margins.

Recent acquisitions highlight these interests. Trade buyers seek to divest non-core assets whereas PE has been focusing on niche innovators, aiming to expand their portfolios, drive operational efficiency and leverage growth through bolt-on acquisitions.

Which chemical companies has KBS Corporate sold?

Avocet Dye and Chemical acquired by John Hogg Technical Solutions

Yorkshire-based Avocet, one of the UK’s leading manufacturers of dyes, flame retardants and textile auxiliaries, was sold to John Hogg in a deal which expanded the Manchester company’s market reach in the speciality dye and chemical business segment.

Car-Chem acquired by Leading Solvent Supplies

Car-Chem, an award-winning Nottingham-based manufacturer and international distributor of vehicle care products, was sold to Leading Solvent Supplies, a major manufacturer and distributor of solvents and chemicals used in a variety of sectors.

Chantry Chemicals acquired by White Sea & Baltic Co

Chantry, provider of a bespoke chemical and raw materials distribution service to the paint, printing inks, surface coatings, janitorial, lubricants, plastics and sealants industries, was sold to White Sea & Baltic, a leading speciality chemicals distributor.