On Jan. 3, BASF (NYSE:BF) announced that it had tendered a $4.9 billion bid to purchase the American specialty chemical company Engelhard (NYSE:EC). For BASF, the deal made a lot of sense for several reasons, including increased exposure to the U.S. market.

One aspect of the deal that analysts have so far overlooked is Engelhard's status as a major manufacturer of nanomaterials. These nanomaterials have marvelous catalytic properties and can be used to improve everything from catalytic converters to plastics.

I'm not suggesting that this was the primary reason the German-based chemical giant targeted Engelhard for acquisition, but I am confident that BASF is well aware of the extraordinary growth potential that Engelhard's nanotechnology can provide for many of its business lines.

The deal highlights how many Fortune 500 companies changed their approach to nanotechnology this past year. Nanotechnology is not -- and will likely never be -- these companies' main area of focus, but, in 2005, it became clear that nanotechnology moved from laboratory curiosity to a major component of many companies' future growth strategies.

In March, Dow Chemical (NYSE:DOW) assigned its entire intellectual property portfolio of dendrimer technology to a small, private nanotechnology company called Dendritic Nanotechnologies in exchange for a 30% stake in the company. Dendrimers are nanoscale devices that can be synthesized with specific properties and tailor-made to hold everything from imaging agents to drug molecules. One practical application: In the not-too-distant future, a single nanoscale device could both detect and treat cancer at a very early stage. If Dendritic Nanotechnologies is successful, Dow would receive a healthy return on the deal.

Dow wasn't the only big company scouring the landscape for promising nanotechnology companies. In 2005, Intel (NASDAQ:INTC) announced that it had entered into partnerships with no less than three nanotech companies, including Qinetiq, Nanosys, and Zyvex. Agilent did the same thing in partnering with Asylum Research, an Atomic-Force Microscope producer; meanwhile, Microsoft, PPG Industries, and Millennium Chemicals, a subsidiary of Lyondell, all jumped on the nanotech bandwagon by joining Accelrys' (NASDAQ:ACCL) Nanotechnology Consortium.

These companies understand that nanotechnology will dramatically affect their businesses. To stay competitive -- and perhaps even relevant -- they need access to the cutting-edge intellectual property, products, equipment, and tools these nanotech startups offer.

When Fortune 500 companies weren't partnering with or acquiring promising nanotechnology startups, many of them were investing heavily in their own nanotechnology-related research and development. This past spring, Seagate announced plans to invest $100 million in the creation of a Nanotechnology Center of Excellence in Ireland. In the fall, Ford and Boeing announced their intention to partner with Northwestern University to develop nanotechnology-related commercial applications, including superlightweight nanocomposites, shape-shifting material, and possibly even self-healing materials.

Much of this R&D is beginning to pay off. The past year saw Hewlett-Packard, in a series of scientific papers, unveil substantial progress in the field of molecular electronics. If successful, this development could allow the company to leapfrog its competition in the computer and data storage businesses.

2005 also saw Motorola announce that it had used carbon nanotubes to create a thinner, clearer, and more viewable flat-panel display than today's state-of-the-art LCD technology. Meanwhile, 3M stated it was developing a new nanocomposite that reportedly mimics bone generation and could provide the company an entry into the fast-growing market of hip and bone replacement.

On other fronts, GE announced it had created the "ideal" carbon nanotube -- an advance that could usher in a new era in electronics and communications by making electronic devices smaller and faster. And IBM unveiled a self-assembling template that company officials believe may represent a relatively low-cost method of constructing computer circuits down to the 20-nanometer range.

Even a number of a major food-related companies, including H.J. Heinz, Unilever, Hershey, and Kraft -- a subsidiary of Altria -- announced they were investigating a variety of nanotechnology applications, including improving the texture of food, delivering nutraceuticals, and developing "smart" packaging.

According to leading nanotech research firm Lux Research, corporations all around the world are now investing more than $4 billion annually in nanotechnology research and development -- an amount nearly equal to all government-related nanotechnology R&D.

By all early indications, corporate funding will surpass government funding this year. Moreover, many Fortune 500 companies will continue to partner with, or -- as in BASF's hostile bid for Engelhard -- attempt to acquire the most promising nanotech companies. These developments suggest that 2006 will be an even more exciting year in nanotechnology. Investors who keep their eyes and ears clearly tuned to the field can expect to profit.

Flash back to Foolish nano news from 2005:

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Fool contributor Jack Uldrich is confident 2006 will be a big year for investors to think small. He is the author of two books on nanotechnology, including the forthcoming, Investing in Nanotechnology: Think Small, Win Big. He owns shares in Intel, Microsoft, GE, 3M, IBM, and Accelrys. 3M and Microsoft areMotley Fool Inside Valuepicks. H.J. Heinz, Unilever, Kraft, and Dow Chemical areMotley Fool Income Investorpicks.The Fool has an ironclad disclosure policy.