FECC markEt ovErviEw

Resilient sector looks for growth

Strong financial performance over the past two years has seen Europes distributors stepping up M&A activity and regional expansion

UK to gain better access to the lubricants industry; Netherlands-headquartered Univar purchased Eral-Protek in Turkey and Beneluxbased Quaron; and IMCD Group, also headquartered in the Netherlands, bought Jan Dekker, as well as Italian firms Nutrivis and Organotec. Belgian specialty chemical distributor Azelis bought Finkochem in Serbia and S&D Group in the UK. Key purchases were also made in AsiaPacific by Brenntag and Nexeo (China), IMCD (Australia and India) and DKSH (Australia) as well as in South Africa by Brenntag and IMCD. Latin America featured too, with Brenntag buying in Mexico and Univar buying in Brazil. Gnther Eberhard of Swiss consultancy DistriConsult says large distributors and private equity-owned second tier companies are preferably seeking growth outside Europe and the US, while the mid-sized, privately-owned distributors are looking for add-ons and specific niche acquisitions in Europe to strengthen their geographic coverage. European M&A activity will be driven by small to midsized additions to tier two/ mid-sized players with a clear strategy and strong balance sheet, says Eberhard.

distributors are seeking ways to give real value in the supply chain
david jukes President, Univar Europe

elaine buRRidge london

hemical distribution is an economically resilient industry that continues to offer tremendous opportunities for growth. Many distributors have recorded strong, if not record, earnings in the past two years. Merger & acquisition (M&A) activity picked up in 2010 and 2011 after a significant slowdown in 2009 because of the financial crisis. Arguably, one of the most interesting deals in Europe last year was the merger of Barentz industrial chemicals business with the chemicals distribution business of Belgian plastics company Ravago. The new company, Barentz
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Ravago Chemical Specialist, which became operational during the first quarter of 2012, has consolidated annual sales of more than 170m ($223m). Pavel Kratochvil, executive vice president and board member of the Netherlands-based group, says the merger was a perfect fit in terms of regional and product coverage, combining Barentz strong industrial chemicals presence in Western and Central Europe with Ravagos chemical activities and infrastructure in Southern and Eastern Europe as well as the Middle East and Africa. Most of the major distributors made strategic acquisitions in 2011 and 2012. In Europe, Germanys Brenntag bought Multisol in the

He adds that the Middle East and North Africa are being increasingly viewed as a growth opportunity despite political fragility. A number of European firms have opened offices in the region or are looking for add-ons. Indeed, several distributors, including Barentz and Univar, are extremely upbeat about prospects in the region. We have very high expectations for the Middle East and Africa, as well as Turkey and the former CIS countries, Kratochvil says. In addition, private equity will ultimately exit investments, for example in Azelis and IMCD, either through a trade sale or initial public offering (IPO). Eberhard believes there could be slightly less M&A activity this year than last as potential sellers lack attractive alternatives for investing the proceeds of a transaction. On the other hand, the potential loss of critical mass in the near future may trigger some selling of smaller companies, while potential buyers are actively trawling the market. Johan van den Arend Schmidt, partner with UK-based PricewaterhouseCoopers (PWC) says the challenge is finding the right
May 2012 | FECC Supplement | 9

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