The COVID-19 pandemic played a role in resin distributor M. Holland's decision to seek out an investment partner.
Ravago Group acquired a majority stake in M. Holland Co., in a deal announced Aug. 22.
"We already had been working on growing and changing and looking at the long-term future of the company," Ed Holland explained. "But during the pandemic, we understood that the global market was changing and that we needed to change as well."
"The market had started to mature a bit. Cycles were getting bigger and longer. Evolution started to accelerate. Global logistics became challenged and parts of the supply chain were exposed," Holland said in an interview with Plastics News.
Ed Holland is chairman and CEO of the family-owned company. He and Marc Fern, the president and chief operating officer, will continue to lead the company.
Fern, who was also on the video call with PN, said the pandemic "showed the importance of being a great global company." Ravago "has great digital and global abilities," he added. "We can grow faster with them."
Ravago's practice of letting previous acquisitions continue to operate independently also played a role in M. Holland's decision, Ed Holland said.
"We'll maintain our brand, our culture and our people," he added. "That was one of the most critical parts of why we chose this direction. Ravago is a builder of businesses, not just a consolidator."
The ability to stay independent "was built into the decision," Fern added.
Looking ahead, Ed Holland said that he's "excited to learn lessons we can draw from [Ravago] and the things they can learn from us."
"This is a case of one plus one being more than two," he added. "It's good for us and our employees long term and will help us improve the company. It's going to create opportunities for a better client and employee experience."
Ravago already ranks as North America's largest resin distributor. Northbrook, Ill.-based M. Holland is one of the five largest, according to industry estimates. Both companies have been growing both organically and via acquisition.
Market watchers contacted by PN weighed in on the potential impact of the M. Holland/Ravago deal.
Bill Ridenour, who worked with M. Holland on four of its acquisitions, said that the firm "is as well managed as any plastics company we have known." Ridenour is president of Polymer Transaction Advisors in Foxfire, N.C.
He added that M. Holland's management team "is both deep and strong" and that Ravago "has an equally strong reputation. … I'm sure that Ravago and M. Holland will find ways to work together in North America, Europe and elsewhere."
The M. Holland/Ravago deal "brings into Ravago's fold one of the largest distributors in the region, which I think is a sound move for M. Holland in current market conditions," said Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston.
Sagel added that North American polyethylene and polypropylene resin demand is down 5-10 percent so far in 2023. As a result, he said, consolidation in resin distribution "provides better purchasing power and can help improve the likely reduced margins that distributors are probably obtaining at this time."
But Sagel also said that the deal could have a negative impact on processors, since Ravago already owns several distributors and now will be adding M. Holland.
"It should be expected that Ravago will explore synergies from this consolidation [with M. Holland], which can result in changes in commercial conditions for processors," Sagel said.
Howard Rappaport, senior adviser with financial firm Stone X in New York, said that M. Holland "has done an excellent job over the last several years of expanding their business in terms of volume, geography, product lines and services."
Rappaport added that the firm "has also been successful at creating a customer-focused culture as they grew their team to meet the overall business needs."
"I'm sure this [recent work] helped put them on the radar screen as an emerging competitor with Ravago's large business portfolio in the U.S. and internationally," Rappaport said. "Hopefully, all the various Ravago entities can operate seamlessly in the marketplace and avoid any potential overlap or redundancies."