Chemical companies derive the most value from their portfolio of businesses

Chemical companies need to maximize value creation from their business portfolio. Growing and optimizing existing businesses (for example, in terms of operations) is often not enough to drive value. Over the years, we have observed several chemical companies trying to optimize their business portfolio to create additional value; not everyone has succeeded. In the eyes of investors, the most reliable source of value creation is to develop a centralized portfolio with several sizable businesses and integrate them around a leading business model.

Finally, active portfolio development requires companies to follow a comprehensive value creation approach throughout the M & a cycle, including buyers and sellers.

On the buyer side, selecting and evaluating the right goals that are consistent with the company's strategy and provide value creation opportunities remains a key success factor. Many chemical companies have also developed solid capabilities in promoting M & A transactions and integrating acquired targets after M & A. However, maximizing value through acquisition requires a broader and deeper approach and a series of enhanced capabilities:

Creating value from the beginning of the acquisition process is an essential factor because it creates the right mindset from the moment the decision to pursue the goal is made. Therefore, the synergy assumption from the initial target evaluation needs to run through the whole acquisition process until the successful implementation of the acquisition.

Value creation must be broad, including a wide range of value sources that affect top and bottom synergies. Top line synergies need special attention because they have proved difficult to achieve.

Realize value as early as possible to ensure quick returns and demonstrate the success of the acquisition to all stakeholders, especially shareholders. While the "cleaning team" is often used between signing and completing a transaction, the focus is often on the first day of preparation. In M & A, leading companies are much more than the first day's activities. They use clean teams to maintain the value of their goals (for example, in terms of customers and employees) and ensure that synergies are achieved on and after the first day.

In terms of acquisition, integration and target setting, companies that always focus on creating value are likely to have the highest success rate.

Recently, we have seen new developments in the M & A environment, as well as leading practices of some companies that should be considered when starting the acquisition process:

In the past few years, antitrust review has become a hot topic in many M & A transactions. Through a longer period of antitrust review, and even modifying the scope of transactions, the feasibility and attractiveness of some transactions have been affected. This is driven by a series of factors, such as the expanding scale of some chemical transactions (large-scale transactions), the increasing integration of several chemical fields (such as agricultural chemicals), and the increasing professional knowledge and review level of regulatory agencies. Therefore, chemical companies need to evaluate the antitrust consequences of each transaction at the early stage of the acquisition process, and test their acquisition business cases for different antitrust scenarios. In terms of capacity-building, this will be a key area of concern.

We also see that enterprises have been preparing for the upcoming M & A action for a long time, not just having the right professional knowledge and personnel to successfully promote specific transactions. These companies have adjusted their organization and operation mode to make the integration after the merger a plug and play initiative.