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?

Frank Schneider: The key drivers for mergers & acquisitions have not changed for the chemical distribution industry. This has always been a market with great consolidation potential. In 2020 and during the first months of 2021 we have seen a very dynamic business environment for the chemical distribution and the chemical industry overall.

“The accelerated digital transformation
has facilitated the creation of new opportunities.”

A crisis typically brings new risks and challenges, and Covid-19 indeed has affected day-to-day business processes as well as M&A activities. However, the accelerated digital transformation that we have seen in the industry, but also within our company has facilitated the creation of new opportunities. In IMCD’s case, it fast-tracked the identification of targets and the initial contact through to the due diligence and closing.
How and if there will be a sustained effect from this crisis, is hard to judge. However, we do not expect M&A activities to slow down in the future. For IMCD, mergers & acquisitions are a central element of our growth strategy. We will continue to strive to strengthen market segment positions and to drive geographical expansion on our way to rapidly globalize our network.