Mergers and Acquisitions – The Path to Value Creation

By Cynthia Challener

Despite the level of consolidation already present in the North American paint and coatings value chain, merger and acquisition (M&A) activity continues, and in many cases, serves as a major path toward value creation. Several notable transactions announced at the end of 2012 were finalized in 2013. While deal-making seems to have slowed following this burst of activity, there is a general expectation among industry analysts that both coating formulators and raw material suppliers are pursuing additional opportunities to expand their product and technology portfolios and geo­graphical presence through acquisitions. Therefore, they pre­dict that the number of transactions will be on the increase again starting in the latter part of 2013 and on into 2014.

M&A volume has been lighter in the first half of 2013 than the market had expected, according to Ben Scharff, managing director of investment bank Grace Matthews, Inc. “Some of the reduction in activity is likely driven by continued uncertainty in the European markets, lower-than ­expected growth rates in Asia, and political uncertainties in the U.S.,” he says. Another contributing factor may be the number of major transactions consummated or announced in late 2012 that involved many of the large paint and coat­ing players. Despite all of the pieces being in place for a highly active M&A environment, Scharff adds that 2013 has been largely a “digestion period” for bigger coatings buyers, with no significant transactions. There have been, however, a number of smaller, strategic deals by industry players fo­cused on geographical and product line expansions.