Interest in mergers and acquisitions of compounding firms has remained strong in 2021.
P&M Corporate Finance of Southfield, Mich., tracked 53 resin, color and compounding deals in the first nine months of the year after recording 40 during the same period in 2020. That's an increase of almost 33 percent.
Compounder Techmer PM LLC of Clinton, Tenn., "is very actively looking" for acquisitions, with some potential deals in Europe, according to Executive Chairman John Manuck. Private equity firm SK Capital Partners of New York acquired a majority stake in Techmer in July 2020.
M&A activity in compounding "is being driven by consolidation up and down the supply chain," Manuck said. He added that one major change in the market has been a sizable reduction in the number of compounders that are privately held.
Polymer Transaction Advisors Inc. of Foxfire, N.C., is currently working to sell two privately owned compounders.
"There's still interest in compounding," PTA President Bill Ridenour said.
"A lot of buyers are financed by private equity firms that are looking to cash in in three to five years," Ridenour said.
There are currently more buyers than sellers in the compounding market, according to Keith Rodden, president of consulting firm Compound Solutions LLC in Lebanon, Tenn. But Rodden added that type of imbalance "is true in every industry right now."
"There's an enormous amount of money chasing anything with a return," said Phil Karig, managing director of Mathelin Bay Associates in St. Louis. "And compounding can have good, solid returns for an investor in mid-market manufacturing or one that's new to the plastics space."
Chroma Color Corp. of McHenry, Ill., has remained active in acquiring compounders and concentrate makers. In October, the firm purchased J. Meyer & Sons Inc., a maker of color masterbatch concentrates for the medical and pharmaceutical markets based in West Point, Pa.
Chroma now has made nine acquisitions in the last three years. Prior to the J. Meyer deal, its most recent transaction came in August when it purchased Adam, Gates & Co. LLC, a maker of specialty dyes based in Hillsborough, N.J.
Investment firm Arsenal Capital Partners combined Chroma with materials firms Carolina Color, Breen Color Concentrates and Breen's Hudson Color unit in mid-2018. In a recent interview, Chroma CEO Shruti Singhal said that M&A "will continue to be a key aspect" of his firm's strategy, even as it continues to invest for organic growth.
Other compounding deals completed in 2021 include:
• Star Plastics Inc.'s acquisition by Akoya Capital Partners. Star does compounding work in polycarbonate and also offers toll compounding services. The firm employs about 175, operating plants in Ravenswood and Millwood, W.Va. Star also has production partnerships in China.
Akoya is a Chicago-based private equity firm. Its current portfolio includes Beacon Manufacturing Group, which does some injection molding work, and Trinity Technology Group, which makes specialty fluoropolymer film.
• Materials firm Teknor Apex Co. acquired the dry color business of Dorum Color Co. The deal was an asset purchase, with Dorum customers now being supplied from a Teknor Color plant in Henderson, Ky. Teknor officials said that Akron, Ohio-based Dorum is focused on the rotational molding market.
• Niche Polymer bought Westchester Plastics and Fluoropolymer Products, two businesses based in Nesquehoning, Pa. An online report said the sale was finalized on Sept. 7 by Ametek Inc., the Berwyn, Pa.-based industrial conglomerate that owned both firms.
Niche is part of a group of companies owned by the Naik family that operate in plastics recycling and compounding. Fluoropolymer Products specializes in heat exchangers. Westchester Plastics, also known as Ametek Westchester, is a toll compounder of engineering resins, alloys, blends and reactive modifiers.
• Ascend Performance Materials made its fourth acquisition in less than a year, buying French compounder Eurostar Engineering Plastics for an undisclosed price. Fosses-based Eurostar has a broad portfolio of flame-retardant engineered plastics and expertise in halogen-free formulations, according to Houston-based Ascend.
Like Techmer, Ascend is a unit of SK Capital. Company officials said the firm will continue to look for acquisitions in the U.S. and China that fit the firm's criteria and strategy.
• Manufacturing veteran Jennifer Bryan acquired OptiColor Inc., the compounding firm that she joined in 2012. Bryan bought Huntington Beach, Calif.-based OptiColor from Daniel Neufeld, who founded the business in 1995. Bryan had been OptiColor's sales and marketing manager and now will serve as president and CEO. OptiColor makes compounds based on polycarbonate, acrylic, nylon and other engineering resins for eyewear, medical, lighting and similar markets.
• Additives supplier Milliken & Co. bought German compounder and concentrates maker Zebra-chem GmbH for an undisclosed price. Officials with Milliken in Spartanburg, S.C., said Zebra-chem is known for its peroxide and blowing agent masterbatches and that the deal will increase their firm's presence in recycling markets.
• Automotive material supplier Haartz Corp. acquired a minority stake in Peak Performance Compounding LLC, a specialty compounder based in Leominster, Mass. Officials with Peak and with Haartz in Acton, Mass., said that together the firms will provide custom and toll compounding for specialty medical and industrial markets.
• Epsilyte Holdings LLC, a provider of expanded polystyrene based in The Woodlands, Texas, acquired Polysource Inc., a Piqua, Ohio-based EPS compounder and molder of building insulation products, safety helmet liners and filtration media. Officials said the acquisition bolsters Epsilyte's green product offering and technical expertise.