Compounders and concentrate makers remain attractive merger and acquisition targets, even if the number of deals in that sector is down in recent months.
Through August, 25 resin, color and compounding deals have been completed in 2024, according to P&M Corporate Finance of Southfield, Mich. That number is down four vs. the same period in 2023.
"The [compounding] market is still attractive to investors," said Keith Rodden, owner of the consulting firm Compound Solutions LLC in Gallatin, Tenn. "Private equity is coming back, and bigger firms are acquiring smaller ones.
"Higher interest rates are affecting private equity, but European investors still see the U.S. as a better alternative to their home market," he added.
Private equity firms "have excess capacity," according to Bill Ridenour, president of Polymer Transactions Inc. in Foxfire, N.C.
"They have to take that extra cash and do something with it, and compounding can give them a good return on investment," Ridenour said.
Although interest rates are higher than they've been in recent years, they're still not high from a historical perspective, added Phil Karig, principal of Mathelin Bay Associates in St. Louis.
"Interest rates aren't affecting the [M&A] business that much," he said. "There's still a number of consolidation opportunities."
Aurora Material Solutions and Techmer PM are among the compounders and concentrates maker growing by acquisition in the last 12 months.
Compounder Aurora acquired engineering resins compounder EnCom Polymers Inc. for an undisclosed price. It was the sixth acquisition since 2017 for Streetsboro, Ohio-based Aurora and the firm's first since late 2022 when it merged with Enviroplas Inc. of Evansville, Ind.
EnCom, also based in Evansville, will be grouped with Enviroplas in Aurora's Engineered Thermoplastics unit. EnCom was founded in 1999 by Rick Kaskel. The firm makes compounds based on nylon, polycarbonate, ABS and other engineering resins for markets including automotive, building and construction, and consumer goods.
EnCom employs 50 at a 54,000-square-foot production site and a warehouse covering more than 80,000 square feet in Evansville. Those sites will remain open, along with the Enviroplas facilities in Evansville.
Aurora CEO Darrell Hughes said recently that his firm "has its foot on the accelerator" for more acquisitions and should announce another one by the end of the first quarter of 2025. The firm also recently hired an M&A director.
"We want to be the acquirer of choice," Hughes said.
Materials maker Techmer PM of Clinton, Tenn., has acquired OptiColor Inc. of Huntington Beach, Calif., for an undisclosed price. Techmer now will consolidate OptiColor's Huntington Beach location into Techmer's larger location in Rancho Dominguez, about 25 miles away. All of OptiColor's machinery and equipment will move to Rancho Dominguez, and employees are expected to move to the new site as well.
OptiColor is a producer of color compounds and concentrates that employs 35 at a 22,000-square-foot location. It has annual sales of between $10 million and $15 million. OptiColor specializes in compounding custom concentrates, pre-colored materials and specialty dyes into transparent, translucent, opaque, clear, white and color products. Those materials then are used in critical applications, such as performance eyewear, military lasers and sustainable lighting.
The acquisition is Techmer's second in less than 18 months. In July 2023, the firm acquired color and additive compounder Advanced Color Technologies LLC of Dalton, Ga.
Techmer should be in due diligence on an additional acquisition by the end of the year, CEO Mike McHenry said recently. "We're looking to add technology and are looking for more acquisitions," he said.
Both Aurora and Techmer are owned by private equity firms. Aurora has been majority owned since 2021 by investment firm Nautic Partners of Providence, R.I. In late 2022, private equity firm Gryphon Investors of San Francisco bought a majority stake in Techmer. Techmer management and investment firm SK Capital retained minority stakes in the firm.
Color concentrates maker Peacock Colors of Addison, Ill., also is open to making more acquisitions, according to CEO Andy Ubhi. The firm most recently acquired a majority stake in Poly Compounding LLC, a toll compounder in Elgin, Ill., in early 2022.
"We're always open to acquisitions," Ubhi said. "If a product line isn't strategic for a company, it's we could acquire."
Other compounding-related deals in the last 12 months include:
• Compounder Kafrit Group made a pair of deals in the first half of 2024. The firm first acquired ABSA Resin Technologies Inc., a compounder and recycler based in Cambridge, Ontario. Officials with Kafrit in Negev, Israel, said the acquisition of ABSA "will add a complete line of filled and reinforced thermoplastic compounds, recycling capabilities and technical services."
Kafrit then bought Badger Color Concentrates Inc. of Mukwonago, Wis. Badger makes color concentrates and liquid colorants. The firm has annual sales of $40 million and employs more than 180 at plants in Mukwonago and in Kings Mountain, N.C.
Kafrit makes a range of compounds and color and additive concentrates. The firm employs 550 worldwide, with annual sales of more than $300 million and annual production capacity of 320 million pounds.
• Chroma Color Corp. acquired color concentrates maker Approved Color LLC for an undisclosed price. Greenville, N.H.-based Approved Color was founded in 1975. The firm makes color concentrates for toys, clothing, cookware, food containers, bottles and other markets.
The acquisition is the 10th since 2018 for McHenry, Ill.-based Chroma but its first since late 2021, when it bought color concentrates maker J. Meyer & Sons Inc. of West Point, Pa. Chroma supplies specialty color and additive concentrates. Its markets include health care, consumer products, packaging and pharmaceuticals.
• Materials firm Color Master Inc. expanded its business model by acquiring resin supplier Rainmaker Polymers LLC. Warsaw, Ind.-based Rainmaker distributes generic grades of polyethylene and other commodity resins. The firm also sells compounds and concentrates that are toll compounded for Rainmaker by other firms.
Rainmaker was founded in 2007 by John Urschalitz and Lee Luckasevic, both of whom had management experience at compounder Polycom Huntsman. CMI of Butler, Ind., makes color and additive concentrates as well as PVC compounds. Terms of the deal were not disclosed.