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?

Dennis Verhaert: Not a lot has changed in this respect as the key drivers have remained the same. However, even though Covid is a global event, its timing and impact on economies and market segments have varied depending on the circumstances. As a result, some local champions exposed to a limited set of economies or market segments have been strongly affected by Covid. This has triggered a reflection in the market, with some smaller players seeing the benefits of being part of a global, more diversified, network.

“Covid did not slow down our
M&A activity nor did it change our M&A strategy.”

We believe that industry consolidation will continue. The underlying drivers have remained the same, such as the trend to rationalize and simplify distributor relationships, market globalization, and increasing regulatory requirements. Covid accelerated the use of digital technologies and the expectations of principals and customers to have access to digital value-added services, such as online portals. Additional opportunities that evolve from new digital innovations will further drive consolidation. Azelis has been, and will continue to be, an active consolidator of the specialty chemicals distribution industry. Covid did not slow down our M&A activity nor did it change our M&A strategy. M&A allows us to accelerate growth with strategic principals, expand geographically and provide a more comprehensive product portfolio to our customers. Whilst being a global player, we will continue to act locally to serve local needs with an entrepreneurial mind-set and the desire to provide sustainable innovation and formulation services to our customers.