{"id":50,"date":"2019-07-09T00:00:41","date_gmt":"2019-07-09T00:00:41","guid":{"rendered":"http:\/\/ahandersonconsulting.com\/blog\/?p=50"},"modified":"2022-12-01T14:21:01","modified_gmt":"2022-12-01T14:21:01","slug":"the-rise-of-private-equity-in-the-industrial-gases-industry","status":"publish","type":"post","link":"https:\/\/www.ahandersonconsulting.com\/blog\/the-rise-of-private-equity-in-the-industrial-gases-industry\/","title":{"rendered":"The Rise of Private Equity in the Industrial Gases industry"},"content":{"rendered":"\n

Over the last 5-10 years the presence of private equity in the industrial gas industry has dramatically increased. Not just at the mid-market level (with local and independent producers\/distributors), but now they have made their presence known on the regional and global stage with companies like PAG Capital<\/strong><\/a> in China and CVC Capital<\/strong><\/a> globally with the Messer Group. Taking a closer look at this trend and its drivers, along with a forecast for the short\/medium term will be topic of this article.<\/p>\n\n\n\n

Background\/History<\/strong><\/p>\n\n\n\n

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Industrial gases have been around a long time, with many of the gases discovered and refined during the Industrial revolution. However, the industry was “truly birthed” in the early 1900s with the invention of “air separation” utilizing cryogenic distillation to separate air into its constituents. Some of the industry\u2019s early entrants were prior to World War I (Linde<\/strong><\/a>, Air Liquide<\/strong><\/a>) and later entrants just before World War II (Air Products<\/strong><\/a>, <\/strong>Messer<\/strong><\/a>) are still around.  A few others joined the industry later and grew to global prominence such as Praxair<\/strong> prior to its merger with Linde in 2018 and Taiyo Nippon Sanso<\/strong><\/a>. So, the list of global players is pretty short which has resulted in some saying this industry is a bit \u201cinsular\u201d (highly consolidated) with the top-5 companies commanding greater than 75% global market share since the 1990s.<\/p>\n<\/div>\n\n\n\n

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So What Changed?<\/strong><\/p>\n\n\n\n

Private Equity (PE) has also been around a long time as well. It formally started after World War II when the first “true” PE firms were established (ARDC<\/strong><\/a> and JH Whitney<\/strong><\/a>). However, the industry didn\u2019t start to grow and pursue large transactions until 1980s (i.e., RJR Nabisco, Safeway, Federated Dep\u2019t stores, Uniroyal Goodrich, etc.) and onwards, going through multiple “boom and bust” cycles. It seemed that the Chemical industry wasn\u2019t getting much attention at this time and it wasn\u2019t until the late 1990s and early 2000s before we observed some activity. Bain Capital’s<\/strong><\/a> acquisition of German company Brenntag<\/strong> in 2004 was one of the early ones, and after a series of M&A transactions across Europe and North America, the company emerged as the world’s largest chemical distributor. Other examples proceeded in select commodity and specialty chemical segments to the point where the industry has been executing 30-70 PE transactions annually since 2009 per Deloitte<\/strong><\/a>.<\/p>\n\n\n\n

 Although, industrial gases is a segment of the chemicals industry it still was not getting the same level of attention from PE buyers as other areas of the chemical industry for a variety of reasons:<\/p>\n\n\n\n