Mergers & Acquisitions
October 13, 2025
M&A Update
GRACE MATTHEWS INSIGHTS
Fall 2025 Newsletter
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Market Update: Near-Term M&A Outlook is Improving
After recent market dynamics created uncertainty, business owners considering a sale are searching for ways to get comfortable when considering the timing of a sale process. Despite the year-to-date slowdown in M&A activity throughout the chemicals and materials value chain (largely due to uncertainty around global trade / tariffs), there are signs for optimism as we begin Q4 and head toward 2026. Market participants and leading indicators are pointing to an uptick in activity in the months ahead. For this edition of Grace Matthews Insights, we analyzed both market data and communications from industry executives to gauge recent conditions and the near-term outlook. The takeaways are encouraging.
The first half of 2025 was marked by a period of tariff-driven macroeconomic uncertainty that led many would-be sellers to hit the pause button on sale plans. Acquisitions (by deal count) of North American based chemicals and materials science companies declined more than 40% year-over-year. This occurred despite expectations for healthy levels of M&A activity as we entered 2025. We view this as a classic case of supply and demand imbalance. While many potential sellers of businesses (supply-side) stayed on the sidelines searching for clarity in market conditions and their own near-term outlook, potential buyers, both strategic buyers and private equity (demand-side), remain well-capitalized and eager to deploy capital.
We saw sequential improvement in transaction volumes in Q3 as conditions improved, and entering Q4, the tone throughout the industry is turning more optimistic. Based on our conversations with industry participants and a review of recent earnings transcripts from dozens of public company CEOs throughout the chemicals and materials industry, we note the following themes indicating where markets are at today and where they may be headed:
- Temporary Slowdown in M&A is Bouncing Back – The climate of uncertainty in the first half of the year caused many transactions to pause or delay as sellers waited for more clarity. This has started to turn, and deal activity is becoming more robust
- Earnings Remain Healthy as Tariff Effects Have Been Hit or Miss – Despite the uncertainty, earnings remain steady. Tariff announcements and subsequent pauses / trade agreements have directly impacted some markets more than others, but companies are adapting quickly
- M&A Remains a Priority, and Strategic Buyers are Well-Capitalized – Corporate acquirers are ready to deploy capital, with a focus on smaller and highly synergistic “bolt-on” deals. Balance sheets remain strong, with average public company Net Debt to EBITDA ratios hovering at comfortable levels around 2.0x
- Incentives to Invest in the U.S. – Tariffs and an overall healthy economic environment relative to other geographies are creating incentives for reshoring and foreign acquisitions of U.S. companies
- Private Equity in Need of Exits – The average duration of current private equity investments is the longest it has been in at least ten years, increasing pressure to realize investments (i.e., to sell or ‘exit’) and return capital to investors
- Emerging Trends Driving Future M&A – Tailwinds to watch in the coming quarters that could accelerate M&A include interest rate reductions, massive investments in infrastructure to support AI, and the ripple effects of China’s anti-involution policy on cross-border trade
Below, we expand on these themes by combining insights from industry executives and analyzing key market trends.
An Underwhelming First Half as Would-Be Sellers Hit Pause
Announced transactions in Q1 and Q2 2025 were off significantly from the same period in 2024. Acquisitions of North American chemicals and materials science companies declined over 40% during this period.
This came as a surprise to many forecasters (including Grace Matthews) who less than a year ago were anticipating a strong level of M&A activity in 2025, as interest rates were widely expected to continue to fall early in the year and a new administration, expected to be more pro-business, was set to take office. Needless to say, much has changed in the last twelve months.
A key driver of the change in sentiment and resulting reduction in M&A volumes was the uncertainty created by U.S. and retaliatory tariffs. After the April 2nd “Liberation Day” tariffs were announced, many potential sellers chose to focus on securing supply chains, implementing pricing initiatives, and assessing how customer demand might be impacted. As a result, the prevailing sentiment in the first half of the year was to “wait and see,” hoping that improved visibility and financial performance could lead to higher valuations (and more deal certainty) in the future.
Figure 1: Announced acquisitions of North American chemicals and materials science companies. Source: Capital IQ & Grace Matthews
Earnings Remaining Stable and M&A Outlook is Improving
Fortunately, much of the negative sentiment and uncertainty has begun to subside, and activity has been increasing. As shown in Figure 1, M&A volumes rebounded in Q3 2025 and were on par with Q3 2024. Despite the tumultuous tariff environment over the past several months, the overall chemicals and materials sector has navigated the situation quite well. Many industry participants were well prepared, perhaps because the last few years of industry shocks have hardened the chemical sector’s collective capability to weather uncertainty (few have forgotten the COVID shutdowns, Texas freeze, supply chain shortages and inflation, and freight cost increases). When tariffs were enacted, companies took action quickly and creatively in efforts to mitigate their impact. Where necessary, companies have shifted trade flows to domestic or lower tariff sources, substituted away from disadvantaged raw materials, optimized inventory levels, and taken selective pricing actions. Due to these actions, effects have been largely secondary for many companies, though select sectors with greater exposure to foreign-sourced materials have seen more meaningful direct impacts. In our opinion, managers in the chemicals and materials sector have never been performing better, and they have had to considering the challenges they have faced.
On net, many companies in the Grace Matthews Chemicals & Materials Index posted reasonable financial results through the first half of the year. As highlighted in Figure 2, the number of companies posting year-over-year EBITDA growth in Q1 and Q2 was consistent with 2024 (hovering around 55-60% of companies). Interestingly, though not surprisingly, the number of companies posting revenue growth jumped significantly in Q2 2025, as companies quickly pushed through price increases as tariffs took effect. Prior to that, the majority of companies dating back to the beginning of 2024 had been posting revenue declines, indicating overall softness in the market.
“Many of the headwinds are merely delays […] underlying drivers of long-term growth remain strong.”
– Christian Koch, CEO, Carlisle Companies
Figure 2: Percentage of companies in the Grace Matthews Chemicals & Materials Index with year-over-year growth in Revenue (left chart) and EBITDA (right chart).
Long-Term Fundamentals Remain Healthy, Multiple Drivers of Investment in the U.S.
On the topic of acquisitions, strategic buyers have remained committed to M&A, as investor pressure to demonstrate growth is ever-present. Sluggish organic growth in many markets tends to put even more pressure on large companies to pursue M&A. Numerous executives have recently cited that their M&A pipelines remain robust, with a focus on disciplined capital deployment. While buyers are cautious about large-scale, transformative “bet the farm” acquisitions, they are eager to invest in smaller bolt-on deals. Key areas of focus include targets with obvious synergies, those that grow market share in high-value end markets and geographies, expand capabilities, and opportunistic investments that arise when market dislocations occur.
Enabling these investments, balance sheets and availability of capital have remained quite healthy. Net Debt to EBITDA ratios are hovering just under 2.0x for the Grace Matthews Chemicals and Materials Index, in line with historical averages. As a rule of thumb, Net Debt under 4.0x EBITDA is manageable, and many public companies unofficially aim to stay at 3.0x or less to preserve flexibility. If borrowing costs decline, as some predict they will in the coming quarters, it will also help private equity buyers, who typically rely more on leverage than strategic buyers do to finance acquisitions.
One aspect of the current environment that should not be overlooked is the incentives U.S. tariffs are creating for both reshoring of manufacturing and for international buyers to seek investments in the U.S. Michael Battles, Co-CEO of Clean Harbors, commented during their second quarter earnings call that “reshoring is no longer a headline. It is becoming a funded reality.” We are seeing this play out in several of our recent and ongoing projects. Two of our closed engagements earlier this year involved a U.S.-based business that was acquired by an international buyer (one headquartered in Germany and another in India). In both instances, the acquirers had a limited presence in the U.S. and were seeking to establish a manufacturing footprint. The current environment only seems to be accelerating the growth in cross-border M&A that has been on the rise in recent years.
“Reshoring is no longer a headline.
It is becoming a funded reality.”
– Michael Battles, Co-CEO, Clean Harbors
Private Equity in Need of Exits
Another driver of near-term activity is the growing backlog of private equity investments. According to Pitchbook, the median holding period for private equity backed companies in the U.S. is now up to 3.8 years, the longest it has been in at least 10 years (see Figure 3). The acceleration from the end of 2024 to June 2025 is quite remarkable and another indicator that very few private equity firms exited investments in the first half of the year. It’s obvious that private equity firms have viewed market conditions for selling a business as sub-optimal in recent years. However, the upward trend we’re seeing will have to reverse at some point as pressure to return capital to investors grows. We are already seeing and hearing of an increasing number of private equity platforms being brought to market as we approach the end of the year.
Figure 3: Median holding period for U.S. private equity backed companies. 2025 data as of June 2025. Source: Pitchbook.
Other Trends Driving Future M&A
Another noteworthy development is the artificial intelligence boom. Serving this rapidly growing market requires huge investments, almost all of which require chemicals and materials inputs. Take, for example, Microsoft’s latest AI data center in Mt. Pleasant, WI called Fairwater. The site spans 315 acres, has a staggering 1.2 million square feet under roofs, 46 miles of deep foundation piles, 120 miles of underground cable, and 72 miles of mechanical piping. The inputs required to build and maintain something like this are almost too long to list: building products and construction chemicals for foundations and structures, metals and metal treatment chemicals for steel piping and structures, water treatment and refrigeration chemicals for cooling towers, fire suppression systems, diesel fuel and lubricants for generators, cleaning chemicals for server rooms to reduce static and prevent dust buildup, to name just a few. This phenomenon has and will continue to provide a boost in demand for companies serving these markets for years to come. Longer term, AI infrastructure will also create competition for electricity, raising potential issues for other energy consumers, including chemicals and materials manufacturers.
Other factors that can influence business owners’ confidence in launching sale processes include interest rates, consumer confidence, and housing starts. In the longer-term, we are also monitoring factors impacting cross-border trade and global production capacities. Specifically, as a result of higher U.S. tariffs on Chinese imports, many European companies allege that they are seeing an influx of Chinese producers dumping products into their markets. Yet another long-term variable is the potential ripple effects of China’s anti-involution policy, the Chinese government’s agenda to reduce overcapacity and price wars by promoting an orderly exit from outdated capacity. This will take time for its effects to be felt but could have positive implications for higher cost of production North American and European producers in markets threatened by low-cost Chinese suppliers. If meaningful capacity truly is taken out of some markets, this could provide a strong tailwind for Western producers.
Figure 4: Aerial view of Microsoft’s new AI datacenter campus in Mt. Pleasant, WI.
Looking Ahead: A Reason for Optimism
So what do we expect as we look ahead? In short, we are optimistic that M&A activity will accelerate over the coming 12-18 months. We see more factors pointing potential sellers to launch sale processes than those causing them to continue to wait. The fundamental drivers of M&A in chemicals and materials remain intact. Amid all the uncertainty throughout 2025, companies have proven to be quite resilient, despite slower organic growth. Large strategic buyers need acquisitions for growth. If anything, slower organic growth has made acquisitions even more important as growth catalysts. Likewise, private equity’s appetite for deals is not going anywhere, and they will increasingly turn to becoming sellers as they work through their growing backlogs.
Grace Matthews Chemicals & Materials Index (EV / EBITDA Multiples)
The Grace Matthews Chemical & Materials Index tracks the Enterprise Value / EBITDA ratios (“EV / EBITDA multiples” or “EBITDA multiples”) of ~100 publicly traded chemicals & materials companies that span multiple sub-sectors and geographies. The Index aggregates the latest reported financial data and stock prices and tracks valuation trends and operating metrics across different industry sectors. Index averages are equally weighted, as opposed to weighting by market capitalization.
Source: Capital IQ & Grace Matthews analysis.
Select Recent Chemicals and Materials Science Transactions
| Closed Date | Acquirer / Target | Target Description | Enterprise Value (EV) | EV / Sales | EV / EBITDA |
|---|---|---|---|---|---|
| Transaction values in $US millions | |||||
| Pending | Berkshire Hathaway / OxyChem | Producer of commodity chemicals, including chlorine, sodium hydroxide and others used for water treatment and healthcare | $9,700 | ||
| Pending | Givaudan / Belle Aire Creations (Rock Island Capital) | Full-service fragrance manufacturer | |||
| Pending | Advanced Drainage Systems / National Diversified Sales (sub. of Norma Group SE) | Manufacturer and supplier of water management, drainage, and stormwater solutions | $1,000 | 3.2x | 16.1x |
| Pending | Kemira / Water Engineering (Nolan Capital) | Provider of water treatment chemicals, consultation, and services | $150 | 2.5x | |
| Pending | Hivest Capital Partners / Novasol Chemicals | Global specialty chemicals distributor | |||
| Pending | Chemtrade / Polytec | Provider of turnkey water treatment solutions | $150 | 6.5x | |
| Pending | Avery Dennison / Business of Meridian Adhesives Group (American Securities) | Manufacturer of specialty adhesives for the U.S. flooring industry | $390 | 3.5x | |
| Pending | Solenis (Platinum Equity) / NCH Corporation | Manufacturer and distributor of industrial, commercial, and institutional maintenance products and services | |||
| Pending | Gemspring Capital / Goodyear Tire & Rubber (Polymer Chemicals Business) | Producer of synthetic rubber, primarily serving the automotive aftermarket space | $650 | 0.7x | 5.0x |
| Oct-25 | Arclin / Polymer Solutions Group (The Jordan Company) | Manufacturer of proprietary and custom polymer additives, dispersions and release agents | |||
| Sep-25 | Hydrite Chemical / Enterprise Specialty Products | Provider of foam control products | |||
| Aug-25 | Mason Wells / Calvary Industries | Manufacturer of metal pretreatments, cleaners, water treatment, and process chemicals | |||
| Aug-25 | Hawkins / StillWaters Technology | Distributor of water treatment chemicals and equipment | |||
| Aug-25 | SNF Group / Obsidian Chemical Solutions | Provider of specialty chemical solutions primarily for completion operations in the oil and gas industry | |||
| Aug-25 | Blue Sea Capital / MicroCare (Heartwood Partners) | Provider of branded consumables for non-discretionary precision cleaning applications | |||
| Jul-25 | South Coast Terminals / Lindau Chemicals | Manufacturer of specialty organic chemicals including advanced epoxy curing agents, promoters, and solvated organic copolymers | |||
| Jul-25 | Velocity Rail Solutions (Wind Point Partners) / Liquid Tech Solutions (Lindsay Goldberg) | Provider of route-based, mobile on-site refueling services to a diverse set of mission critical end markets | |||
| Jul-25 | Truelink Capital / Zep (New Mountain Capital) | Manufacturer of cleaning and maintenance products | |||
| Jul-25 | Pritzker Private Capital / Buckman | Specialty solutions provider for water treatment and industrial processes | |||
| Jun-25 | Aditya Birla Group / Cargill (Specialty Chemicals Business) | Manufacturer of formulated resins, curing agents, reactive diluents and polyaspartic resins | |||
| May-25 | Peninsula Polymers / Rodaj | Distributor serving the CASE, Packaging, and Specialty markets | |||
| May-25 | Hasa (Wind Point Partners) / Clearwater Chemicals | Texas-based water treatment provider for commercial and recreational pools, competitive aquatic systems, and water cooling tower systems | |||
| Apr-25 | Bertram Capital / Applied Adhesives (Arsenal Capital) | Distributor and manufacturer of adhesives for the packaging, product assembly, paper converting, and automotive markets | |||
| Apr-25 | Quaker Houghton / Dipsol Chemical | Supplier of surface treatment and plating solutions | $153 | 1.8x | 10.5x |
October 9, 2025
ADNOC Update
ADNOC offers concessions in bid to resolve E.U. probe of $14B Covestro deal
Oct. 06, 2025 11:14 AM ETCovestro AG (CVVTF) Stock, COVTY StockBy: Carl Surran, SA News Editor
Abu Dhabi’s state oil group ADNOC said Monday it offered concessions to the European Union’s competition regulator in a bid to end a probe of the company’s €12 billion (~$14 billion) takeover offer for German plastics maker Covestro (OTCPK:CVVTF) (OTCPK:COVTY).
The package of commitments includes a pledge to maintain Covestro’s (OTCPK:CVVTF) (OTCPK:COVTY) intellectual property in Europe as well as concessions on the company’s unlimited state guarantee from the United Arab Emirates, Bloomberg reported.
A spokesperson for the European Commission said the companies filed remedies to the regulator as part of its investigation but did not disclose any specifics.
The E.C. started investigating ADNOC’s deal for Covestro (OTCPK:CVVTF) (OTCPK:COVTY) in July under a European Union law designed to tackle market distortions caused by companies with heavy subsidizing from non-E.U. governments, and the deal also is under scrutiny by German regulators under rules governing foreign direct investments.
September 4, 2025
Adnoc Covestro EU Probe Delayed
Adnoc says EU probe delays could jeopardize Covestro deal – reports
Sep. 04, 2025 10:00 AM ETCovestro AG (CVVTF) Stock, COVTY StockBy: Joshua Fineman, SA News Editor
Abu Dhabi’s Adnoc said the European Union competition regulator’s decision to temporarily halt its probe into the Covestro (OTCPK:CVVTF) deal could jeopardize the transaction.
“While we remain committed to pursuing a constructive path forward, the continuation of such an approach raises serious questions about the viability of this investment,” a spokesperson for XRG, the international investment arm of Adnoc, told Reuters and MLex in an email.
The European Commission was set to decide on the probe by Dec. 2, though it will now set a new deadline.
“We are deeply disappointed by today’s decision,” the spokesperson for XRG told the news outlets. “The Commission’s demands have strayed far beyond what is reasonable or relevant to this transaction, crossing into areas that are both disproportionate and invasive.”
Covestro shares fell as much as 11% on Thursday in Frankfurt.
The European Commission in late July announced it was starting an in-depth probe into Abu Dhabi National Oil Co.’s €11.7B (~$13.75B) acquisition of Covestro (OTCPK:CVVTF) (OTCPK:COVTY) under the European Union’s tough new foreign subsidy rules. The EC said it will investigate concerns that Adnoc’s state funding by the United Arab Emirates could allow it to behave in a way that interferes with fair competition across the bloc.
September 2, 2025
Dow Sells Additional 9% of Equity in Diamond Infrastructure
Macquarie Ups Stake in Diamond Infrastructure to 49%
- Diamond Infrastructure Solutions leverages Dow’s operational excellence and Macquarie Asset Management’s infrastructure and energy expertise to generate growth opportunities by opening access to Dow’s U.S. Gulf Coast sites to third party customers
- Dow to receive total cash proceeds of approximately $US3.0 billion, inclusive of $US2.4 billion related to initial 40% equity stake
Macquarie Asset Management today announced that Macquarie Infrastructure Partners VI (“MIP VI”), an unlisted infrastructure fund managed by Macquarie Asset Management has exercised the previously announced option to acquire an additional 9% equity stake in select U.S. Gulf Coast infrastructure assets of Dow Inc. (“Dow”) (NYSE: DOW). This brings MIP VI’s total equity stake in Diamond Infrastructure Solutions (“Diamond”) to 49%.
Diamond is a specialist infrastructure provider to Dow and other industrial customers at its five locations in Texas and Louisiana, offering comprehensive services to its tenants with a focus on world class efficiency, reliability and safety. As a dedicated infrastructure company, Diamond has formed a new business model with greater strategic focus on operational efficiencies and new customer acquisition.
“In the four months since the joint venture between MAM and Dow was established, Diamond has established itself as an independent company focused on delivering world class infrastructure services and has already attracted a number of new unaffiliated customers,” said Ben Way, Global Head of Macquarie Asset Management. “We are thrilled to have the opportunity to increase our investment in Diamond as it grows its presence as the premier chemical park operator in North America.”
Macquarie Asset Management is a leading global infrastructure asset manager with a focus on operational excellence. It prioritizes investments in high quality, essential assets that can be improved over time and deliver growth and reliable service to customers, as well as the health and safety of employees. Macquarie Asset Management has specific experience in managing and operating industrial parks, regulated utilities and other industry-oriented infrastructure platforms. Over the last 22 years, Macquarie Asset Management has invested or committed $US26+ billion in more than 60 portfolio companies across the Americas region.1
https://www.miragenews.com/macquarie-ups-stake-in-diamond-infrastructure-1525492
August 26, 2025
Avery Dennison to Acquire Meridian’s Flooring Business
Avery Dennison to acquire Meridian’s flooring business 
MENTOR, Ohio – August 25, 2025 — Avery Dennison Corporation (NYSE:AVY), a leading global materials science and digital identification solutions company, today announced it has signed a definitive agreement to acquire the U.S.-based flooring adhesives business of Meridian Adhesives Group, a global adhesives manufacturer, for the purchase price of $390 million. The acquisition is subject to certain customary closing and post-closing adjustments.
Meridian’s flooring adhesives business is a leader in the development, manufacture and commercialization of specialty adhesives and coatings for the U.S. flooring industry, with projected 2025 revenue of approximately $110 million and attractive operating margins. Headquartered in Dalton, Georgia, it operates four manufacturing facilities in the United States and employs approximately 110 people.
“Avery Dennison remains sharply focused on expanding in high-value categories, both organically and through M&A,” said Deon Stander, Avery Dennison president and CEO. “This acquisition will leverage our materials science capabilities, while deepening our specialty adhesives solutions, with a business that is highly regarded within the floor covering industry for its product quality, strong customer relationships and continuous innovation.”
Upon completion of the transaction, the flooring adhesives business will become part of the Avery Dennison Materials Group business. The Meridian flooring adhesives business includes Taylor Adhesives, Polycom and Frontier Products’ brands.
“This acquisition is an excellent fit with Materials Group,” said Ryan Yost, president, Avery Dennison Materials Group. “It adds a valuable set of application-oriented solutions in high-value categories to our adhesives portfolio. We see strong cost and technology synergies that will build on our materials science capabilities, acrylic adhesive expertise and open new application opportunities for us in the flooring industry.”
Ralph Grogan, commercial president of flooring, Meridian, added: “I am incredibly proud of what our teams at Taylor Adhesives, Polycom and Frontier Products have built. With Avery Dennison’s backing and reach, these brands are well-positioned to continue growing and delivering even greater value to our customers.”
Avery Dennison expects the transaction to close in the fourth quarter. It is not expected to have a material impact on the company’s adjusted earnings per share in 2025. Chemlink Partners, LLC and Goodwin Procter LLP advised Avery Dennison on the transaction. Piper Sandler, Moelis & Company, and Weil, Gotshal & Manges LLP advised Meridian on the transaction.
About Avery Dennison Avery Dennison Corporation (NYSE: AVY) is a global materials science and digital identification solutions company. We are Making Possible™ products and solutions that help advance the industries we serve, providing branding and information solutions that optimize labor and supply chain efficiency, reduce waste, advance sustainability, circularity and transparency, and better connect brands and consumers. We design and develop labeling and functional materials, radio-frequency identification (RFID) inlays and tags, software applications that connect the physical and digital, and offerings that enhance branded packaging and carry or display information that improves the customer experience. Serving industries worldwide — including home and personal care, apparel, general retail, e-commerce, logistics, food and grocery, pharmaceuticals and automotive — we employ approximately 35,000 employees in more than 50 countries. Our reported sales in 2024 were $8.8 billion. Learn more at www.averydennison.com.
About Meridian Meridian Adhesives Group is a leading manufacturer of high-performance adhesives, providing cutting-edge solutions across electronics, flooring, infrastructure, packaging, and product assembly markets. With a strong portfolio of innovative brands, Meridian is dedicated to delivering superior adhesive technologies to meet the evolving needs of global customers.
https://www.arsenalcapital.com/news/avery-dennison-to-acquire-meridians-flooring-business
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