CDI Global

Specialty Chemicals in the Post-Covid World

Two and a half years after the Covid-19 Pandemic upset the world economy, with widespread vaccinations, we continue to see strong economic recovery. Nonetheless, supply chain disruptions, rising inflation, and political crises present a new set of challenges in most industries.

CDI Global investigated the effects of the pandemic and subsequent challenges on the Specialty Chemical industry in the United States. Our analysis used data from the Specialty Chemicals 1500 index on Standard and Poor’s Capital IQ database and other qualitative research on companies in the index.

The Global Specialty Chemicals Market was valued at USD 778.53 Billion in 2020. In North America, where the U.S.  accounts for the largest share of business, the specialty chemicals market was valued at USD 240.28 Billion in 2018 and is projected to reach USD 370.23 Billion by 2027; it is expected to grow at a CAGR of 5.1% over the next 5 years.

Our research had three goals. The first was to assess the rate of recovery as pandemic restrictions were lifted and the economy rebounded. Specifically, we tried to understand whether the impact of the Covid Crisis was short-lived or has lingering effects on the industry. The second goal was to assess the general economic strength of the specialty chemicals industry sector. The third was to explore the possible implications for business combinations going forward.

Our conclusions are limited by our depending on information only from publicly traded companies. Incorporating private companies for which there are limited disclosures might provide somewhat different conclusions.

Overall, multiples in the Specialty Chemicals Industry in the U.S. have approached the pre-pandemic levels and trends despite the challenges in the current economic environment.



Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

EV / Revenue (Median)













EV / EBITDA (Median)













EV / EBIT (Median)













Price / Book Value (Median)













Price / Earnings (Median)













Notably, for the ratio of Enterprise Value to Revenue (EV/Revenue), following a sharp increase from 2.2 times at the start of the pandemic to a peak of 3.2 times in Q2 2021 (45.5% increase), the EV/Revenue multiple declined back to 2.5 times within one year, almost reaching its long-term pre-pandemic average.

In the case of EV/EBITDA multiples, the 12 quarters predating the outbreak of the pandemic were characterized by a slow but steady decrease from 13.1 to 9.4 times. The opposite trend could be observed from Q3 2020 until Q2 2021, when the EV/EBITDA multiple reached its peak at 15.0 times. The U.S. specialty chemicals industry has then seen a decrease in the multiple over the last twelve months to 11.7 times, reaching the same level as during Q3 2020, at the height of the Covid Crisis. This equates to a 22.0% decrease from the last peak.

Looking at EV/EBIT, the multiple fluctuated moderately between Q3 2017 and Q1 2020. The outbreak of the Covid Crisis then led to a sharp increase in the multiple over the next 3 quarters, with a record high of 23.4 times in Q1 2021. Following the same trend as EV/Revenue ratios, the multiple decreased steadily towards its pre-pandemic levels over the last 5 quarters.

Turning to the Price to Book Value (P/BV) multiple, the effect of Covid-19 temporarily reversed the steady decrease of the multiple over the last 9 pre-pandemic quarters. Nonetheless, as the global and U.S. economies began recovering, the downward trend of the P/BV multiple resumed as well, remaining comparable to the ratio for the entire chemicals Industry.

Finally, after a volatile period in 2017 and 2018, the Price to Earnings (P/E) multiple stabilized at an average of 20.6 times for 6 quarters before experiencing a sharp increase in the early stages of the Covid Crisis. The P/E multiple then followed a similar downward trend as the EV/Revenue ratio, decreasing from the peak of 32.7 times in Q1 2021 towards the long-term pre-pandemic average.

The impact of the pandemic can then be broken down into 3 parts. Firstly, all multiples experienced a decrease in Q2 2020, when economic activity came to a halt globally. Secondly, all multiples increased sharply over the next four quarters and reached a peak in Q1/Q2 2021. Lastly, as widespread availability of vaccines allowed economic activity to resume, the specialty chemicals industry faced a stabilization of demand prospects and mitigation of supply chain disruptions. Hence, all multiples followed downward trends towards their pre-pandemic levels.

Looking at major North American public players in specialty chemicals market, we observed that the uncertainty caused by the crisis incentivized companies to reform their portfolios according to the changing market requirements, reconfigure supply chains to improve resilience, as well as purse strategic partnerships to accelerate growth, complement capabilities, and achieve more competitive cost structures.

The key North American public players in specialty chemicals market are The Sherwin-Williams Company, PPG Industries, Inc., DuPont de Nemours, Inc., Ecolab Inc., International Flavors & Fragrances Inc., Eastman Chemical Company, Celanese Corporation, RPM International Inc., Avient Corporation, Axalta Coating Systems Ltd., and Albemarle Corporation. These companies provide specialty chemicals for the diversified industry applications. However, we can already observe accelerated restructuring of product portfolios to increase focus on agrochemicals, pharmaceutics, electronics, and energy sectors, which are expected to register the highest CAGR in the market over the next five years. Technological advancements in the industrial sector, increasing population and growth in the demand for food across the world, as well as the global attempts to reduce dependency on fossil fuels have driven these trends.

This shift is particularly important within the context of high inflation, as well increasing interest rates and prices of natural gas, crude oil, and all other natural resources. Taking a closer look at both the magnitude of the multiples and their volatility for top industry performers versus everyone else, we observe a significant and growing imbalance. For example, companies that serve the mentioned array of sectors with robust demands are seeing better margins than companies that only have market exposure in lower-growth markets. To be precise, average gross margin and gross profit increase for public specialty chemicals companies with industry multiples within the Top Quartile was more than 40% and 70% respectively, whereas the Bottom Quartile companies’ average was 15% gross margin and negative 10% gross profit increase.

Notably, Livent Inc., a spinoff from FMC Corporation, performed in the top quartile throughout the past 8 quarters, with multiples on average four times higher than the industry median and a 136% YOY gross profit increase. Having recently completed the acquisition of Nemaska Lithium, a Lithium battery testing company, Livent is strengthening its positions in the electronics and energy sectors.

Among the larger players, DuPont de Nemours made 3 major acquisitions in 2021. It acquired Rogers Corporation, a company that focuses extensively on specialty materials and chemicals for electric and hybrid electric vehicles (EV/HEV), wireless infrastructure, thermal solutions, and clean energy. DuPont also acquired Laird Performance Materials, a developer and manufacturer of electromagnetic and thermal shielding products. DuPont experienced a 26.2% YOY gross profit increase and a 35.1% gross margin over the last twelve months.

Private Equity companies have also recognized the potential of the specialty chemicals industry within the agrochemicals, pharmaceutics, electronics, and energy sectors. For example, Bain Capital acquired the specialty ingredients business from Lonza for 4.3bn, a division that focuses on microbial control chemicals, as well as custom manufacturing of specialty chemicals and composites for electronics, aerospace, food and agrochemicals.

According to a Deloitte analysis of data from S&P Capital IQ, the number of mergers and acquisitions increased by 55.4% in 2021. While these transactions alone cannot provide a definitive answer to the development of the gap in multiples and margins, the companies’ acquisition strategies likely played a role in boosting shareholder confidence and prospects of future earnings.

Importantly, a crisis is often a catalyst for innovation, establishing new industry structures and cost levels, so we can expect this trend of increased M&A activity in the specialty chemicals industry to continue as companies are leveraging their innovation strength and resilience to reinforce positive prospects while mitigating the impact of Covid-19 pandemic as well as all other economic disruptors.

By: Denis Gribincea

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