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Will the trends observed in 20 continue to drive M&A activities in 2019? Will the continuing trade tensions impact deal activities in certain geographies?Will the gathering headwinds be an obstacle for upcoming deals?These are some of the questions explored in our 2019 Global chemical industry mergers and acquisitions outlook.In 2018, M&A activities remained solid across geographies with minor declines in certain markets including the US, China, UK, and Germany.These key markets were partially offset by increases in India, the Netherlands, Japan, and Brazil.Dense smoke rises from the plant of Jiangsu Tianjiayi Chemical Co on March 22 after an explosion in Xiangshui County, Yancheng city, East China's Jiangsu Province.Over the last few years, nearly all of the largest chemical companies have been involved in very large, global merger or acquisition transactions (see table below). For many of these companies, organic growth has been stubbornly low since the financial crisis (volume growth in the 1-2% range), which prevented them from achieving earnings growth at rates they had been accustomed to in the past.In addition, the 2015/2016 time frame was especially challenging for chemical companies with industrial and/or agriculture end-market exposure, given the cyclical headwinds from lower commodity prices and slower global economic growth.
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The Jiangsu provincial government plans to shut down as many as 30 industrial parks that house chemical plants and close thousands of companies, according to media reports.
Jiangsu is one of the largest bases for chemical industries in China.
Should Akzo Nobel eventually decide to sell its paints and coatings business to PPG (it spurned several PPG offers earlier this year, but PPG can re-engage beginning December 2017), Axalta would be in a similar position to acquire attractive assets.
Management is returns-focused with regards to capital allocation decisions, so I believe they will continue to act rationally with respect to price paid for acquisitions.