Why Are Companies Prioritising Speciality Over Commodity in Chemical M&A? AgileIntel Perspective

In 2024, BASF’s sale of its U.S. pigment business and Clariant’s divestment of commodity chemical units exemplified a prominent trend: chemical companies shifting from volume-driven commodity products to high-margin speciality segments. These moves reflect an industry transformation using strategic M&A to drive growth, improve profitability, and support innovation. 

Sector Economics and Strategic Drivers 

M&A strategies in speciality versus commodity chemicals are based on differing economics, market dynamics, and operational profiles. 

Specialty Chemicals 

• Speciality chemicals are high-value, low-volume products for specific applications such as adhesives, coatings, catalysts, and performance polymers. 

  
  

• Margins are strong, often exceeding 15–20%, supported by proprietary formulations and limited competition. 

  
  

• R&D investment is higher, with 3–5% of revenue dedicated to new product development, supporting ongoing innovation. 

  
  

Commodity Chemicals 

• Commodity chemicals are high-volume, standardised products such as ethylene, methanol, PVC, and basic solvents. 

  
  

• Margins are lower, typically 5–10%, and highly sensitive to global supply-demand fluctuations. 

  
  

• R&D focuses on process efficiency and cost reduction rather than differentiation. 

  
  

Strategic Drivers Behind M&A 

When considering M&A opportunities, several strategic drivers consistently shape the rationale behind deals: 

• Profitability and Margin Expansion: Speciality segments attract premium valuations due to higher margins and defensibility. Divesting commodity units can free up cash for reinvestment in higher-growth areas. 

  
  

• Market Positioning and Growth Potential: Speciality chemicals often serve rapidly growing, less-cyclical sectors, while commodity chemicals cater to mature, price-sensitive markets. 

  
  

• Portfolio Optimisation: Companies leverage M&A to streamline operations, focus on core competencies, and rebalance exposure between high- and low-margin segments. 

  
  

These drivers are interconnected. For example, a company divesting commodity chemicals may simultaneously acquire speciality assets, enhancing capital efficiency and growth potential. Consultants should evaluate how these strategic drivers align with the buyer’s long-term vision, considering integration challenges, technological capabilities, and market trends. 

Valuation Implications 

Valuation approaches vary significantly across sectors. Speciality chemical targets typically command higher EBITDA multiples, reflecting anticipated growth, innovation pipelines, and strong customer relationships. Commodity chemical businesses are more susceptible to cyclical pressures, necessitating careful scenario analysis to determine fair enterprise value. While valuation is quantitative, the strategic context, market positioning, technological capabilities, and regulatory exposure often influence the final deal price and structure. 

Strategic M&A Case Studies 

Recent transactions exemplify the rationale and execution strategies behind M&A in the chemical industry, highlighting the interplay of profitability, portfolio management, and strategic alignment. 

• Clariant: Clariant, a Swiss speciality chemicals company based in Muttenz, sold its North American Land Oil business in 2024 to focus on higher-margin segments. This divestment improved profitability by approximately 300 basis points and bolstered its R&D-led innovation capabilities, allowing Clariant to reallocate capital toward sustainable growth areas. 

• Lanxess: The German speciality chemicals company Lanxess, headquartered in Cologne, intends to sell its 40.94% stake in Envalior, a joint speciality chemicals venture, to partner Advent International. The €1.4 billion transaction enables Lanxess to streamline operations and redirect capital toward higher-growth speciality segments. 

• DIC Corporation: Based in Tokyo, Japan, DIC Corporation is a global manufacturer of printing inks, pigments, and speciality chemicals. Through its subsidiary Sun Chemical, it acquired the global pigments business of a competitor, enhancing its portfolio in coatings, inks, and speciality applications. This acquisition strengthens DIC’s international market position and improves its offerings for customers requiring high-performance pigment solutions. 

• Evonik / PeroxyChem / Huntsman: Evonik Industries, headquartered in Essen, Germany, is a global leader in speciality chemicals for nutrition, care, and performance materials. Its acquisition of PeroxyChem and Huntsman’s speciality portfolio illustrates a strategy of cross-border speciality expansion, focusing on consolidating niche technologies and enhancing geographic reach. The emphasis is on integrating advanced capabilities rather than prioritising volume growth. 

• AkzoNobel Speciality Coatings Divestiture: AkzoNobel, a Dutch multinational in Amsterdam, focuses on decorative paints and performance coatings. It sold portions of its speciality coatings business to concentrate on high-margin decorative and protective coatings. This divestiture enabled AkzoNobel to redirect resources toward innovation-driven segments, enhancing long-term portfolio resilience and strengthening its market position in high-growth areas. 

  
  

These examples demonstrate that M&A in speciality chemicals is highly strategic, targeting high-margin segments, optimising portfolios, and leveraging operational and R&D synergies. Divestitures in commodity sectors free up capital, allowing companies to focus on areas that drive sustainable growth. 

Key Takeaways 

Several strategic imperatives shape M&A in both speciality and commodity chemicals. Companies seek innovation-driven growth while reshaping commodity portfolios to allocate capital better and strengthen competitive positioning. 

• Speciality chemicals drive growth: Their high margins and product differentiation attract significant investment and result in higher company valuations. 

  
  

• Commodity Chemicals as Portfolio Levers: Divestitures free up capital and enable companies to concentrate on high-value segments. 

  
  

• Integration is Critical: Aligning R&D teams, operational processes, and market strategies is essential for realising synergies. 

  
  

• Valuation and Market Context: EBITDA multiples in speciality deals are higher due to innovation pipelines and customer loyalty; commodity valuations are more sensitive to price volatility. 

  
  

• Strategic Capital Allocation: Deals must be assessed within long-term corporate strategy, balancing profitability, growth potential, and operational efficiency. 

  
  

Strategic Insights: Unlocking Value in Chemical M&A 

Speciality chemicals represent the strategic frontier for profitable M&A, offering defensible margins, innovation-led growth, and resilient market positions. While commodity chemicals remain essential, they are increasingly used as tools for portfolio optimisation and capital redeployment rather than as primary growth drivers. 

For industry leaders and consultants, success hinges on a nuanced understanding of: 

• Profitability and margin dynamics.

  
  

• R&D intensity and innovation pipelines.

  
  

• Market positioning and growth potential.

  
  

• Integration complexity and synergy capture.

  
  

• Strategic alignment with long-term corporate objectives.

  
  

At AgileIntel, M&A decisions grounded in these strategic insights empower companies to unlock long-term value, strengthen market positions, and confidently navigate the evolving chemical landscape.