Investment in companies continues, but selling businesses at a profit has become harder
The playbook has changed for private equity investors in the chemical industry.
These companies, often called PE firms, typically invest in family-owned businesses or in divisions no longer wanted by big chemical makers. But tough market conditions have made it difficult for them to quickly sell their holdings at a profit. So in 2026, PE firms are focusing more on acquisitions that can offer steady cash flow and hands-on improvement. They are favoring smaller or specialty businesses and holding investments longer.
The total value of PE deals the chemical industry reached nearly $20 billion across 278 transactions in 2021, then fell sharply over the next 4 years to $5.9 billion in 2025, according to data from S&P Market Intelligence. But rather than a collapse in dealmaking, the data show a decline in average deal size: the number of transactions rose in 2022 and 2023, reaching 313 deals in 2023 before easing in 2024 and declining more meaningfully in 2025.
For private equity investors, the chemical industry “has just not been in great favor,” says Seth Goldblum, national leader for private equity with Cbiz, a business advisory firm. “There are so many uncertainties that impact the industry from both a political and economic perspective that created uncertainty last year. I think buyers have just been wary about putting too much money into these types of investments right now.”
‘Trouble getting out’
Factors depressing chemical company valuations include higher interest rates, inflation, trade barriers, and slow growth in customer markets like housing and automotive.
The strategy of private equity investors is to buy businesses, try to improve them for a few years, and then exit their investments at a profit. But these economic challenges have led to fewer exits via initial public offerings (IPOs) or sales to strategic buyers that integrate the businesses into their larger operations.
“The problem is valuations peaked a few years ago and have gone down,” says Peter Young, CEO of Young & Partners, a chemical and life science strategy consultant and investment bank. “In addition, chemical industry growth and profitability have been under pressure the last 2 or 3 years.”
“Private equity who bought chemical businesses a few years ago are having trouble getting out.”
Private equity who bought chemical businesses a few years ago are having trouble getting out,” Young adds. “Although they may have grown and improved the business, weaker profits, lower valuations, and fewer buyers have trapped private equity owners because they have to show a certain equity return.”
Some PE firms have opted to sell their chemical assets to other PE firms rather than attempt a stock offering or a sale to a strategic buyer. In January, for example, Windjammer Capital purchased MFG Chemical from Platte River Equity in a deal with undisclosed terms.
For another PE firm, SK Capital, the tough business environment necessitated major financial restructuring at two companies in its portfolio.
In December, the SK-owned specialty chemical maker SI Group announced a recapitalization to reduce its indebtedness by $1.7 billion and take on an additional $150 million in investment. And the nylon maker Ascend Performance Materials declared bankruptcy last April amid declining sales, high debt, and overcapacity in the nylon market. Ascend emerged from bankruptcy in December. In both cases, SK gave up control of the chemical company.
But even if PE firms are having trouble exiting investments profitably, they continue to buy, sometimes at bargain-basement prices. In deals known as carve-outs, the Saudi Arabian petrochemical maker SABIC agreed in January to sell its European petrochemical business and its engineering plastics businesses in Europe and the Americas to two European industrial holding companies. In both cases the selling price is much lower than what SABIC paid for the businesses years ago.
A moderate outlook
Looking ahead, industry analysts expect PE activity to remain moderate in 2026, with a continued focus on targeted divestments and smaller acquisitions.
Historically, financial buyers have preferred US and European specialty chemical businesses and have been reluctant to buy commodity chemical businesses or companies based in Asia, Young says. “They have been successful in buying a large number of specialty chemical businesses, although they are often outbid by strategic buyers.”
Chris Cerimele, a managing partner at Balmoral Advisors, an investment bank, expects to see more European deals this year, since the industry there is currently at a structural disadvantage relative to China and the US.
“Some firms might be betting on things like a continued reduction in interest rates in the United States or looking at other factors where they can say they’re going to play the long-term cycle,” Cerimele says. “Others are just looking for value, because they know that with carve-outs, there can be opportunities to create value and build that way.”
Many of the assets available now are businesses within big companies that have been underperforming—but because of market conditions and a decline in demand rather than mismanagement. Such carve-outs may make more sense for PE firms than for strategic acquirers, Cerimele says.
“That’s a really good opportunity for a private equity firm to be the first buyer, and then once they get it more stable and things improve, they can sell to strategics,” Cerimele says. “A lot of the PE firms that we talk to, they’re looking for those opportunities when they’re evaluating acquisitions.”
Smaller transactions, longer hold times
In addition to carve-outs, experts say PE companies and their investment funds are in the market for small companies with owners looking to retire or founders ready to scale beyond the early growth stage.
“A lot of deals are happening with companies now that are $100 million to $500 million in revenue,” says Frederic Choumert, a partner in the chemical practice at McKinsey & Company. “You see funds that typically would not have focused on that size range actually invest money there, sometimes even create special funds to focus more investments in those areas.”
No matter the deal size, PE firms will likely continue holding their portfolio companies longer because of an exit market that has limited IPO opportunities and misalignment between buyers and sellers when it comes to what businesses are worth.
As a result, when PE firms are looking at acquisition targets, they’re placing greater emphasis on improving the business itself rather than simply the potential for financial engineering.
“Holding periods have doubled in the last 4 or 5 years,” Choumert says. “Seven or 8 years is not uncommon, so you want to make sure that during those 7 or 8 years you basically make your money back.”
