Penrice sees systems as a way of moving up closer to adhesives customer in the supply chain. ‘Dow is a large company in the adhesive sector, but as a raw material supplier,’ he explained. ‘Dow is interested in industrial and construction adhesives, elastomers, small customers with high technology and higher than usual P/E margins.’
Another potential growth area is footwear. ‘That could be interesting as it moves back out of Asia to Turkey and north Africa, and it’s going a bit further up market,’ he said.
A range of sectors
Composites is the final area of interest for Dow. ‘It’s fairly small, compared to unsaturated polyester resins, but processability and performance are there,’ Penrice claimed. ‘Polyurethanes sit in the gap where it is more processable than epoxy and higher performance than polyester. We’re seeing much higher growth rates in composites in automotive and industrial applications.’
He added that there are small companies that lack scale but have global ambition. ‘We can give them global growth and expansion,’ he said. ‘These are areas where the large companies feel that they can give niche systems houses a boost: access to diisocyanates, which have been hard to source for many months and access to big company competences. These include marketing, distribution and, potentially, capital.
The company is also very flexible on the type of M&A, Penrice said. ‘They could turn into joint ventures or marketing alliances,’ he said. ‘We are not dogmatic. We want the entrepreneur to have skin in the game and to want to continue, but we can help scale, and they can grow much faster with us, or they can cash out.’
Huntsman’s Hansen explained that, to start with, there is always a relationship between Huntsman and the owner or general manager. ‘That means there is a continuum when they are acquired. The owner will typically stay with the business at least for a transition period of several years and many are still with us,’ he said. ‘We allow them to retain their entrepreneurial DNA. We don’t get in the way – we support with supply, capital and we open our technology and innovation, and keeping that balance.’
He said that, as the owners are driven entrepreneurs, he has not had a problem setting stretch goals. ‘It’s more about following and helping with globalisation because they don’t have a network outside, he said. ‘Take Tecnoelastomeri. We have taken the brand to Asia, to America. [When we bought] EMA in 2012, they were number five in Turkey. Now they are one or two, and they have worked their way up. That is the model we are using in Dubai. Expanding is the managing team’s responsibility. They are extremely driven, very hungry for business. We give them the leverage.’