In the past few years, the global chemical industry has carried out a series of mergers and acquisitions. At present, although the concentration of some sub-sectors, especially the industrial gas and agrochemical industries, is nearing a high point, there are opportunities for continued integration in some sub-sectors. Relevant industry executives have recently stated that this year they are still facing pressures for business development and business portfolio optimization. Most observers believe that the near-term consolidation hotspot will be the paint / coating industry. There may be some industry giants in the paint / coating industry with a market value of up to $ 135 billion.
Coatings industry becomes M & A hotspot
Although the American coatings giant Xuanwei completed the acquisition of Valspar in June 2017 and became the world's largest coatings manufacturer, in 2017 the world's coatings business failed to make progress.
The first is that in March 2017 AkzoNobel rejected an active acquisition offer of 20.9 billion euros from its US counterpart PPG Industries. At the end of November of the same year, AkzoNobel and Japan's largest coating supplier Nichito Holdings bid for Axalta's coatings and eventually gave up. Industry insiders said that this status quo is temporary.
"The merger between Xuanwei and Valspar may increase pressure on other players in the coatings industry," said MuktaSharma, general manager of the chemicals business at IHSMarkit. "The acquisition battle between PPG, AkzoNobel, Axalta and NTU Holdings is also under pressure. This is proven. It is clear that the expansion of mergers and acquisitions by some large coatings companies will stimulate their peers to adopt the same strategy. "
Industry insiders said that although PPG and AkzoNobel's merger could not be reached, companies like Axalta Coatings, Nippon Paint Holdings or RPM International could be targeted. Currently, both Axalta and RPM companies make business acquisition an important part of their development strategy.
Decentralized industries will be integrated
In addition to the coatings industry, other chemical industry segments will also be integrated. The adhesive industry is still relatively fragmented. The world's five largest adhesive companies have a combined market share of less than 40%. "At present, there are many small companies in the adhesive industry, or branches of some larger companies." Jim Owens, president and CEO of H.B. Fuller, said there are still many opportunities for integration.
Fuller has taken a big step in 2017-acquiring rival Roller Adhesives and Sealants for $ 1.58 billion.
Telly Zachariades, a partner at The Valence Group in New York, said: "For the chemical business, market size and market access are more important. By acquiring competitors, you can quickly enter the market where you have established business channels." In industries where the market's competitive advantage is not so prominent, the integration speed is slower. At present, industries with relatively slow integration include fine chemicals and food additives. The adhesive and sealant industries are in the midstream.
Private equity firms await exit
In addition, smaller companies are also consolidating. John Arsenal Capital Partner. JohnTele? Vantos said: "Small private companies are looking for high valuations and good exit opportunities." Arsenal is a private equity company focused on the chemicals business, and has been responding to this in recent years. A development trend, including the purchase of shares in Rolls before 2015, and the current purchase of shares in Dutch IGM Resins. John. "IGM resin was originally a distributor, but now it is the only company engaged in the research of UV-curable coating photoinitiators. In this area, some large companies have withdrawn, and we bought two Chinese companies and put them together. "
Although private equity firms consider it a good time to exit their investments, they are not in a hurry to exit the market. Lee Harrs, head of the chemicals business at investment bank Houli? HanLokey, said: "Private equity firms are waiting to exit until they feel the investment is no longer profitable."
More focus on core business
In addition to business integration, another trend is that companies are focusing more on core business. Radical investors are often promoters of streamlining the company's product portfolio. Radical investors from Dow and DuPont have facilitated the merger. In diversified companies such as AkzoNobel, Ashland, Formex and Ferro, radical investors are also directly or indirectly promoting their strategic transformation. Almost all changes are toward business simplification.
LeeHarrs said that Europe generally lags behind the United States in chemical restructuring, usually lagging 3 to 5 years. Investors have now abandoned diversification and don't expect this to change in 2018. Corporate consolidation and product portfolio restructuring are likely to continue, and medium-sized, diversified chemical companies will face a crossroads.
