In February, Atlas, the holding company of the Azelis Group announced the sale of the specialty chemicals distributor to global private equity firm Apax Partners. Since 2007, when private equity investor 3i acquired a majority stake in Azelis, the company has transformed from a decentralized European business into an integrated group with a turnover of €1 billion and facilities in more than 35 countries worldwide. Apax Partners said they intend to continue Azelis' strategic focus on growing the business through ongoing development of its product portfolio and continuing to extend its global reach, both organically and through acquisitions. Azelis CEO Dr Hans-Joachim Mueller explained to CHEManager's Dr Michael Reubold what the new ownership means for Azelis' future strategy.

CHEManager: Dr Mueller, before talking about the future, could you briefly summarize the milestones Azelis achieved in the past years under the ownership of 3i?

Dr H.-J. Mueller: 3i really supported us in enabling our reorganization and providing the means to deliver rapid and sustainable growth over the last years. When 3i took over Azelis in 2007, they aimed to establish a pan-European platform for the industry segments Azelis was serving at that time. So, until 2011 they undertook quite an acquisition spree. By then all the white spots, except for a few, were covered by Azelis affiliates throughout Europe. Also 3i pressed hard to bring Azelis on one ERP platform. This was a major effort, because as you can imagine, all these companies had different ERP systems and to get a consolidated view on the business was really difficult back then. But until 2009 Azelis still was a confederation of companies, not only with regard to the ERP system, but also with different names, reputations and the ways they were doing business. So, the next focus was to develop one Azelis corporate identity and create one Azelis brand. Today, we are Azelis and we share one common set of values and aspirations all over the world.

In 2012, when I joined the group, the business was not living up to the expectations because in addition to economic factors, we had too much internal focus and had lost some focus on principals and on customers. Also, acquisitions done at the end of 2011 had resulted in some dis-synergies for the business. With the support of 3i we started to build a strategy. First, we defined the lateral value chain, (what products we needed and where, coupled with the associated services and technical staff needed to support them) and then we targeted strategic principals. Based on this concept, in 2013, we built a strategy for the industry segments we are serving, which, in 2014, we mirrored into the different countries and aligned with the overall strategy.

From 2011 to 2013 Azelis' sales revenues decreased from EUR 1.2 billion to below 1 billion. Was that mainly due to divestments?

Dr H.-J. Mueller: Yes, this was due to the fact that Azelis divested activities such as the composites business and the polymer business. Also, we de-emphasized the commodity arena because we are not a commodity player and don't want to be one. There are completely different rules of the game in the commodities compared to the specialties business.

Over the last two and a half years we have put a strong focus on rebuilding the trust of our principals. This really is key for us. It is important to gain new principals, but we have to serve those who entrusted us with their business first. We have decreased general and administrative expense by 30% since I came, and year after year, have added experienced frontline technical sales people into the market - many joined us from the particular industry segment that they are now lead. And we have built 15 new applications labs to support our partners in developing individual solutions.

Over the last two years our profitability has grown mostly by focusing on specialties and services, and we are also growing top-line again.

What will your growth strategy look like under the new ownership of Apax Partners?

Dr H.-J. Mueller: We will not completely change our direction into what we are doing. Today, we serve more than 20,000 customers in the coatings, chemicals, rubber & plastic additives, food & health, animal nutrition, pharma and personal care industries. I am not a big fan of transformational acquisitions, because I do believe that as a specialty chemical distributor you would potentially buy yourself a lot of dis-synergies. So we will only make bolt-on acquisitions to enhance our existing platform in Europe for segments and markets where we feel that the company we are looking at, represents a beneficial fingerprint. Because then there is a smaller risk of losing something once you try to integrate.

 When it comes to Asia, the situation is a little bit different as my readiness to acquire small players in Asia is rather cautious, because our board, shareholders and principals expect us to be very prudent when it comes to business practices.  And from my years in Hong Kong I know that if you have a business which is just a small family shop in Asia you can always run the risk that it is not compliant. So this is something I try to avoid. If we do bolt-on acquisitions in Asia, they will be planned and looked at very carefully. We would follow a so-called tag-along approach, meaning that a blue-chip principal of ours in Europe will entrust its Asian business to us. This is how we entered into China, and it worked very well. Today we have over 70 people at 5 locations in China. We did the same in Japan and in Vietnam. This is how we will drive growth with Apax. There won't be a disruption of the strategy, but we will have a little bit more freedom when it comes to doing bolt-on acquisitions.

Speaking about geographies, Africa is pretty high on our agenda and we are about to open our first office in Morocco. We have hired people to serve the market there. We obtained a business entrusted from a blue-chip principal we are working with in Europe. We will then move further into the market, into Algeria, and we also want to move into Nigeria, Angola, and Kenya.

What is your vision for the future of Azelis?

Dr H.-J. Mueller: Our strategy for growth is centered on the ambition to further build a lateral value chain in the market segments we serve. This clear vision is currently being implemented throughout the company, both locally and internationally. This new phase of our development will improve our future business prospects, facilitate expansion plans and accelerate growth, which - as I said - may include targeted acquisitions where needed.

Our business approach, first and foremost, is all about the technical service element: being in front of customers with the technical and application expertise to clearly explain our principals' products and present the synergies our unrivalled specialty product portfolio can offer - at any stage of product development from concept through to manufacture. This is what individual principals cannot do because they are usually focusing on their own particular products. It is very much about having a coherent approach to the market supported by application labs.

And certainly it is all about growth. So we will continue hiring technical sales people. We will stay very lean on the G&A side. By 2020, we will have delivered an excess of 10% CAGR for the business with regard to the top line. And we are currently on a very good track with that.

Apax said that they will support us in further establishing a position as a leading global distributor, continuing to strengthen our proposition for principals and customers, embarking on a phase of strong international growth in order to achieve the full potential of the business over the years ahead. Obviously, Apax at some point will also look into what to do with the business, and the exit strategy could either be selling Azelis to another private equity owner or doing an IPO, but this is pure speculation at this moment in time.