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By Andrew K. Petryk, Managing Director and Head of Industrials, Brown Gibbons Lang & Company, Cleveland, OH

Organizations are seeking lower-impact performance solutions from their suppliers as the commitment to environmental responsibility and a circular economy deepens. Creating products that use bio-based and renewable raw materials, reduce waste or energy usage, or lower VOCs are examples of how manufacturers of engineered materials are advancing their customers’ long-term sustainability goals as consumer demand for sustainable products grows.

“The main trend today that we see in this industry is sustainability. Customers and end users are asking for more-sustainable products.”¹ — Yohann Trang, global market director for Construction Materials at Arkema, on trends in the adhesives and sealants market.

Sustainability has driven the transition from solvent-based to water-based coatings. In 2023, PPG Industries reported a 30% increase in sales from waterborne coatings. By leveraging its sustainably advantaged products, PPG formed a partnership with HP to deliver lower-impact coatings for their products, securing a preferred supplier position and significantly increasing overall sales to HP.² Acquisitions also play a role in securing access to fast-growing water-based coating technologies, such as Stahl’s purchase of ICP Industrial Solutions Group (ICP), which advances Stahl’s efforts to transition customers to more sustainable packaging.³

Kraiburg TPE is developing more sustainable thermoplastic elastomers, including bio-based TPEs, which the company says can reduce a product’s carbon footprint (PCF) by up to 50% compared to TPEs made from fossil-based materials.⁴ Tobias Brückner, Project Manager for Advance Development at Kraiburg TPE, commented, “Our bio-based TPEs provide more sustainable solutions while maintaining the usual performance and reducing the product carbon footprint. We look forward to projects that enable us to transition from fossil-based to more sustainable raw materials.”

Audia Elastomers, through its AudiaFlex™ family of sustainable thermoplastic elastomers, produces customizable grades of TPEs from post-consumer, post-industrial, bio-based, and marine-based sources. First launched in 2021, AudiaFlex was one of the first TPE portfolios to meet the sustainability needs of brand owners and consumers, according to a company statement.⁵

Megatrends with increasing sustainability relevance for engineered materials manufacturers include electrification and infrastructure, where government initiatives are contributing to growth. The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) will drive future spending and includes carve-outs for electric vehicles and multiple categories of critical infrastructure, such as water and renewable energy. These represent growth markets for Seal for Life Industries (SFL), acquired by Henkel in April 2024. SFL provides innovative protective coating and sealing solutions for both new construction and the rehabilitation of existing assets, benefiting from aging infrastructure trends prevalent in the U.S. SFL CEO Jeff Oravitz said, “Our product portfolio has tremendous sustainable characteristics, including many 100% solids and zero-VOC materials, and they provide critical protection solutions for assets. That is unique to SFL.”

“The demand for solutions that enable the extension of asset life of infrastructure is continuously growing.”⁶ — Henkel, on the acquisition of Seal for Life Industries and its coating and sealing solutions.

In 2023, sales of electric vehicles (EVs) and hybrids in the U.S. rose to 16.3% of total new light-duty vehicle (LDV) sales—up from 12.9% in 2022.⁷ By some forecasts, new electric vehicle (BEV and PHEV) sales could reach nearly 30% of all new car sales by 2030, up from about 3.4% in 2021.⁸ H.B. Fuller was recognized with the Innovation Award by the Adhesive and Sealant Council (ASC) in 2023 for its new product EV Protect 4006, a lightweight encapsulant for lithium-ion batteries used in the production of EVs and battery storage banks, as reported in the company’s 2023 Sustainability Report.⁹ Axalta Coating Systems is developing industrial coating technologies to improve EV design, driving range, performance, and efficiency through its advanced materials offering, such as dielectric powder coatings, encapsulating resins, and electrical steel coatings.¹⁰

Innovation

Industry participants are innovating with sustainability, which is a driving force behind increased investments in R&D and new product development.

• Stahl devotes substantial resources to innovation. Forty-eight percent of the company’s R&D projects had an ESG focus in 2023—up from 31% in 2022. The company is invested in replacing fossil-based raw materials in its products and has dedicated much of its recent innovation activity to this effort.¹¹
• According to H.B. Fuller’s 2023 Sustainability Report, nearly 60% of the company’s new product development projects focus on increasing the sustainability of its customers’ end products. In addition, 23% of 2023 revenue came from new solutions introduced in the past five years.¹²
• PPG Industries reported 44% of its sales came from sustainably advantaged products in 2023, moving the company toward its 2030 goal of 50%. Recent successes include the introduction of low-carbon, bio-based paints; low-VOC paint films; and sustainable packaging.¹³

“Sustainability drives every single R&D project we have today and that has started in the last two years,” said Yohann Trang, Global Market Director for Construction Materials at Arkema. “We provide, and will continue to provide, even more sustainable solutions, whether bio-based, lower carbon footprint, mass balance, products that perform better with a lower dosage, or that give better durability. Every aspect is being explored within the group.”¹⁴

“We’re working more closely than ever with our partners to make a positive impact across the wider coatings value chain, including suppliers, customers, and brands.”¹⁵ — Laura Willemsen, Group Director of Sustainability & Marketing, Stahl.

M&A Transactions¹⁶

June 2024: Henkel Acquired Seal for Life Industries from Arsenal Capital Partners
Seal for Life Industries supplies innovative coating and sealing solutions to diverse infrastructure markets, such as renewable energy, oil and gas, and water. Products include heat-shrink sleeves, viscoelastic coatings, epoxy and urethane coatings, fire protection, insulation, and sound-dampening coatings. In 2023, Seal for Life reported sales of approximately €250 million.

“Strategic acquisitions to actively shape and strengthen our portfolio are an integral part of our Purposeful Growth Agenda. Seal for Life offers an attractive and highly profitable portfolio in protective coating and sealing, perfectly complementing our existing platform for the maintenance, repair, and overhaul market. With this transaction, we will further enhance our product portfolio in this attractive market and unlock even greater growth potential for our leading Adhesive Technologies business.” — Carsten Knobel, Chief Executive Officer, Henkel

“Maintenance, repair and overhaul (MRO) is a strategic growth market for us, offering great opportunities for innovative solutions that help protect, retrofit, and enable digitally monitored infrastructure, while also contributing to sustainability. This transaction marks another building block in creating and developing a growth platform in our MRO business. It will enable us to further expand our offering in sustainability-driven, future-oriented markets such as renewable energy and water supply.” — Mark Dorn, Executive Vice President, Henkel Adhesive Technologies

June 2024: Meridian Adhesives Group Acquired Bondloc UK Ltd.
UK-based Bondloc manufactures high-performance specialty adhesives, including anaerobic adhesives, cyanoacrylates, epoxies, UV-cure adhesives, and structural acrylics for demanding industrial applications in the automotive, aerospace, electronics, and general manufacturing markets. With the acquisition, Meridian expands its geographic reach in the UK and European markets.

"We are pleased to welcome Bondloc UK Ltd. to the Meridian family. This acquisition is a testament to our commitment to expanding our capabilities and delivering unmatched adhesive solutions to our customers. The company’s strong reputation and innovative product line will be invaluable as we continue to grow and enhance our market presence.” — Daniel Pelton, Chief Executive Officer, Meridian Adhesives Group

May 2024: H.B. Fuller Acquired ND Industries
ND Industries (ND) supplies specialty adhesives and fastener locking and sealing solutions, serving customers in the automotive, electronics, aerospace, and other industries. ND, which serves a global customer base from facilities in the U.S. and Asia, generated approximately $70 million in revenue in fiscal 2023. The business represents a new growth market segment and will operate within H.B. Fuller’s existing Engineering Adhesives global business unit. ND is projecting sales to reach around $80 million in 2024, with an EBITDA margin of more than 30%, said H.B. Fuller CEO Celeste Mastin in the company’s FQ2 2024 earnings call. Mastin also highlighted the financial terms of the transaction, indicating a total purchase price of approximately $250 million, which equates to a pre-synergy EBITDA multiple of less than 10x and a post-synergy EBITDA multiple of approximately 6x.

“ND Industries has been a very profitable, family owned business for several decades and has impressively built one of the most extensive product portfolios in the pre-applied fastener industry. Their products are a natural fit with our existing market segments and bring new technology to our portfolio — combining the benefits of an adhesive and a mechanical fastener in extremely demanding applications — resulting in a powerful advantage for our customers. The acquisition accelerates one of our top growth priorities and is consistent with our focus on proactively driving capital allocation to the highest margin, highest growth market segments within the functional coatings, adhesives, sealants, and elastomers or CASE industry.” — Celeste Mastin, CEO, H.B. Fuller

February 2024: Arsenal Capital Partners Acquired Polycorp Ltd.
Ontario-based Polycorp manufactures rubber- and polyurethane-based elastomers designed to help reduce corrosion, abrasion, vibration, and noise in infrastructure and industrial-focused applications for the mineral processing, rail, and protective linings industries.

“The transaction with Arsenal will accelerate Polycorp’s strategic growth initiatives and enable additional investment in our manufacturing and R&D capabilities, human capital, and strategic acquisitions.” — Peter Snucins, Founder, Polycorp

“The company’s portfolio of capabilities is a natural fit for Arsenal, given our previous successful experiences investing in elastomeric and polymeric technologies, such as rubber and polyurethanes.” — Brett Schneider, Operating Partner, Arsenal Capital Partners

December 2023: GEON Performance Solutions (a portfolio company of SK Capital Partners) Acquired PolymaxTPE
PolymaxTPE develops premium thermoplastic elastomer (TPE) materials for manufacturers across a diverse range of industries. The company operates from two facilities in the U.S. and Nantong, Jiangsu, China, which serve a global customer base throughout North America, Asia, and Europe. SK Capital Partners formed GEON Performance Solutions in 2019 with the acquisition of the Performance Products & Solutions business of PolyOne Corporation (now Avient Corporation).

“PolymaxTPE is a recognized leader in TPE research, development, and manufacturing, serving customers globally. This addition represents a key step forward in GEON’s strategy. The Nantong facility and tenured team will enable us to better serve our customers in the Asia-Pacific region, and the facility in Illinois will support our continuous growth in North American markets through expanded polymer solutions and market access. We look forward to maximizing the incredible expertise of the PolymaxTPE team augmented by the resources of GEON and bringing its TPE solutions to our customers.” — Tracy Garrison, Chief Executive Officer, GEON Performance Solutions

November 2023: Hexpol AB Acquired Star Thermoplastics Alloys and Rubbers
Founded in 1993, Star Thermoplastic Alloys and Rubbers (Star) is a U.S.-based thermoplastic elastomer (TPE) compounder serving the automotive, building and construction, medical, industrial, electronics, and consumer industries. The company’s TPE grades can be injection-molded, extruded, and blow-molded. Star’s manufacturing footprint includes about 90,000 square feet of compounding and research space, which includes advanced manufacturing lines and five research laboratories. The company has annual sales of approximately $20 million. Based in Sweden, Hexpol AB is the largest custom rubber, TPE, and specialty compounder in the world, according to the Plastics News 2023 Rubber News custom mixing rankings. The company reported sales of $2 billion in 2023.

“The acquisition of Star Thermoplastics is in line with our growth strategy and will enable Hexpol to enter the American TPE market through a well-established company with a strong product portfolio.” — Peter Rosén, Acting CEO & CFO, Hexpol

“Star Thermoplastics will enable us to replicate our successful European TPE growth journey in the larger American TPE market. Both our existing TPE companies in Europe and China and Star Thermoplastics will be stronger through this expanded footprint.” — Ralph Wolkener & Carsten Rüter, Presidents, Hexpol TPE Compounding

November 2023: KKR Acquired Chase Corporation
Chase operates in three primary segments: adhesives, sealants, and additives; corrosion protection and waterproofing; and industrial tapes. The company serves diverse end markets, such as aerospace, automotive, bridge and highway, construction, energy, medical, oil and gas, utilities, and water and wastewater, among others.

“We look forward to supporting Chase in its next phase of growth through developing exciting new products, executing strategic acquisitions, and serving customers in growing end markets, including critical applications in electronics, fiber optics, and electric grid infrastructure.” — Josh Weisenbeck, Partner, KKR

May 2023: Arkema Acquired Polytec PT
Germany-based Polytec PT develops thermal interface materials for batteries and engineering adhesives for the electronics market. With the acquisition of Polytec PT, Arkema advances its strategy to become a full system provider to the fast-growing batteries and electronics markets.

“We look forward to welcoming Polytec PT’s teams and supporting them in their ambitious roadmap. We are convinced that the combination of Arkema’s expertise in batteries, its global adhesives footprint, and Polytec PT’s technologies will enable us to become a recognized partner for our customers in batteries and electronics.” — Vincent Legros, Executive Vice President, Bostik Adhesive Solutions

March 2023: Stahl Acquired ICP Industrial Solutions
ICP manufactures high-performance coatings used in packaging and labeling applications, with food and pharmaceuticals among its major end markets. Major geographic regions served include North America (close to 70% of sales) and Europe. The company had estimated sales of approximately $140 million in 2022. With the addition of ICP’s water-based and energy-cured coating technologies, Stahl advances its efforts to transition customers to more sustainable packaging.

“Completing this important strategic acquisition is an important milestone for our organization. Stahl and ICP Industrial’s product focus and technologies are highly complementary, and the acquisition will enhance our growth profile, diversify our target markets, and broaden our technology base. Integrating ICP Industrial’s expertise and range of innovative low-impact solutions into our portfolio will add further value to our stakeholders as we work to create a more sustainable coatings value chain.” — Maarten Heijbroek, Chief Executive Officer, Stahl