Is M&A in the Coating Business Space about to pick-up? This is something that current Chief Executive Officer of Axalta (AXTA US) Charlie Shave believes as stated in an interview with consulting firm Mckinsey end of August.
“My view is there will be one or two large consolidation steps in the next two years, but I can’t tell you which they will be. And below the mega-deals, the leading players will continue to do three to five medium-size acquisitions each year,”
Mr. Shaver is someone who has extensive experience within the Industry. He is about to leave Axalta (AXTA US), to become CEO of the chemical divisions of Akzo Nobel (AKSA AS), which has agreed to sell the division to LBO group Carlyle (CG US).
In late 2017, Axalta (AXTA US), who’s biggest shareholder, Warren Buffet, ended a sales process of itself to Nippon Paint (4612 T) for approximately $9.1bn according to Reuters as Axalta wanted a higher offer.
Post the falling apart of the deal, Nippon Paint (4612 T) specifically pointed out that it will continue to look for potential m&a opportunities. Prior to the bid from the Japanese company, Axalta was in the process of a merger of equals with Akzo Nobel (AKSA AS).
The Coating industry is roughly a $130b market yearly. There are roughly 10 big players globally, whilst there are plenty of companies in each subsector. There is in effect only a few segments that are consolidated, such Aerospace Coating, as the customer base consists of a few large Airplane companies.
Mr Shaver continued pointing out in the interview with Mckinsey;
Underneath the calm waters, there are always things going on although they may not be evident to investors. I think that among the top ten coatings companies, management teams continue to look for reasonable ways to consolidate this industry. Everybody is playing the chess board. My view is there will be one or two large consolidation steps in the next two years, but I can’t tell you which they will be. And below the megadeals, the leading players will continue to do three to five medium-size acquisitions each year.
Below is a graph of the biggest Coating companies in the world based on sales, and if Mr. Shaver is right with continued increase of m&a and consolidation, it is a good time to put all of these on the radar. Besides the names mentioned above, companies such as PPG (PPG US), Sherwin Williams (SHW US), RPM (RMP US) , BASF (BAS DE), Kansai Paint (4613 T), Masco (MAS US), Jotun, Hempel, DAW, Berger Paint and Delux are all companies to follow.
Source: Coating World Magazine
It is important to point out that when m&a commences with 1-2 deals in a specific sector, there tends to be a shake-up within the whole industry as all big players suddenly try to position themselves instantly, and rate of m&a deals increases during a short period of time.