Brenntag to double M&A war chest, expand digital focus

BARCELONA (ICIS)–Brenntag has doubled its annual mergers & acquisitions (M&A) budget with an eye to investing beyond the chemicals distribution space to enhance its data and technology offering

The German headquartered group will now aim to spend €400-500m/year on M&A, with an emphasis on digital technologies as well as faster-growing emerging markets and building its supplier and customer base.

Company CFO Kristin Neumann, said: “Our key aims are to enhance capabilities and market positions, particularly in emerging markets. We will selectively fill blank spots and improve our technology capability.”

The company has a list of more than 300 potential targets, with a handful in intense discussions.

The €290bn distribution market is still highly fragmented, with Brenntag only holding a 5% market share.  The top six distributors only hold 12% of the market, according to Brenntag’s analysis.

The company sees huge potential for growth in the chemical distribution sector because of the continuing trend of outsourcing by suppliers which want to reduce the complexity of their supply chains.

The chemical distribution market is 14 times smaller than chemical manufacturing, and grows more quickly. It is less capital-intensive and cyclical than chemical production, making it especially attractive to private equity investors looking for a steady return on their investment.

DIGITAL EXPANSION
CEO Christian Kohlpaintner said: “Technology will be increasingly important going forward … we need to become a more data-driven and technology oriented company and that will make us look at [M&A] targets which are not classic chemical distribution.”

As part of its new Vision 2030 strategy, Brenntag is introducing a digital data excellence program which it calls DiDEX.

“This will enhance efficiency, growth and excellence across the organization and transforms the company from the core to become a data and technology-driven enterprise,” said Kohlpaintner.

Brenntag has two operating divisions, Specialties and Essentials. The strategy sets out different priorities and business models for these.

Post 2022 the Essentials business – which houses mainly commodities – will have a regional focus, but with more global sourcing. Specialties will house global business units for individual end markets.

According to Kohlpaintner: “Growth in specialties is mainly driven by value-added services and the focus on application expertise and customized solutions. Industrial chemical distribution on the other hand has very different trends and drivers like cost efficiency, global network coverage and ensuring security of supply.”

The company also unveiled new financial targets.

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