Fairlawn, Ohio — Thermoplastic elastomers are a fast-moving industry and that rate of change “makes it kind of hot” for potential investors, M&A veteran Deborah Douglas said at a recent industry conference.
“TPEs can be a niche, and everyone wants a niche because it's competition-resistant,” Douglas said at TPE TopCon 2016. She added that having patented products “makes a difference.”
So far in 2016, two TPE-related M&A deals have taken place in North America. In February, compounding leader PolyOne Corp. of Avon Lake, Ohio, paid $72 million for part of the styrenic block copolymer compounding business of Kraton Performance Polymers Inc. of Houston. PolyOne officials said at the time that the deal will allow the firm to further expand its TPE business, which includes its GLS product line.
Then in March, materials firm Americhem Group of Cuyahoga Falls, Ohio, acquired Vi-Chem Corp., a compounder based in Grand Rapids, Mich. The product mix at Vi-Chem is evenly split between PVC and TPE compounds. The firm generates 90 percent of its annual sales from the automotive market. In addition to automotive, Americhem officials said that buying Vi-Chem will provide their firm with opportunities to grow in medical and other markets.
“The ideal M&A deal is one plus one equals three,” said Douglas, who founded St. Louis-based Douglas Group in 1991. “That's what we look for — like advantages in cross-selling where companies can combine their strengths.”
Private equity companies also now are much more active in M&A. Douglas said this partly is the result of low interest rates and “a lot of baby boomers investing.” She added that in 2000 her firm had 90 equity investors in its database — it now has 3,000.
An M&A deal also can benefit the company being sold. Douglas cited a plastics company that her firm sold in mid-2011, when the plastics firm had $12 million in annual sales, 62 employees and four pieces of major equipment. By the end of 2015, less than five years later, that same firm had $34 million in annual sales, 140 employees and 15 pieces of major equipment.
Identifying the right time to sell can depend on several factors. Some owners may wait for a market to peak. But Douglas added that “sometimes, it's just that time in your life — it's got nothing to do with the economy or anything else.”
And while employees sometimes are fearful of being part of an acquisition, Douglas said such a deal can be a tremendous opportunity.
“Good owners take care of their employees, and they choose a buyer that way,” she said. “Employees don't have to be afraid of a sale — it can be the home run of a lifetime.”