Expert Statement: Christian Kohlpaintner, Brenntag
Mergers & Acquisitions Are an Integral Strategic Component
In the drive to reach growth objectives, or to maintain and enhance “critical mass”, mergers & acquisitions (M&A) has been a theme for the chemical distribution industry for years. The industry leaders (by size and geographic reach) were all built through a series of such transactions. As the practice is further trickling down to the smaller and mid-sized company layer of the sector, and more distributors espouse external growth options, it is worthwhile to spend some time on a reflection of recent events in this context.
Although M&A activity has been slowed down to some extent by the Covid-19 pandemic, the basic drivers are still relevant. Thus, it can be expected that industry consolidation will even be accelerated by the effects of the global lockdown that has been causing a global economic crisis, disruptions in international trade, production outages, and thus stressed supply chains.
Other factors such as the digital and ecological transformation of the chemical industry and its impact on value chains, trade conflicts, or Brexit will even increase the need to enhance critical mass and establish more widespread networks – and thus build more resilient businesses.
CHEManager asked executives and industry experts to share their views on the rationale for M&A activity in chemical distribution. We proposed to discuss the following aspects:
- Have the key drivers for mergers & acquisitions in the chemical distribution industry changed due to the Corona crisis?
- Will industry consolidation and thus M&A activity continue or even speed up after the Corona crisis?
- Do you want to play an active role in the industry consolidation, and if so, what is your strategy?
Christian Kohlpaintner: The industry consolidation is primarily driven by factors irrespective of the Corona crisis. The most significant of which are a highly fragmented marketplace, favorable profile for the distribution trade, and inexpensive financing. Thus, industry consolidation will continue. And Brenntag will take an active role in this as it is an integral component of our overall growth strategy.
“The industry consolidation is primarily driven
by factors irrespective of the Corona crisis.”
We will continue to allocate some €200–250 million for M&A per year and sharpen our focus towards emerging markets and Asia, in particular China. We want to grow in selected industry segments and strive to identify targets delivering a more sizable operating EBITDA contribution. In 2021, we already started executing this approach with signing an agreement to acquire Zhongbai Xingye, a specialty food ingredients distributor in mainland China.