M&A activity

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Cleaning spray

Large groups in the cleaning and hygiene products sector look to make acquisitions in order to mitigate the effects of lower organic growth, generate costs savings in materials sourcing, and in order to differentiate their own product offerings and counteract new market entrants.

The continued consolidation in the sector is driven by the need for geographic expansion as consumer appetite increases globally

The continued consolidation in the sector is driven by the need for geographic expansion as consumer appetite increases globally, this is evidenced by the high number of cross-border acquisitions in this sector in recent years.

The current corporate appetite for bolt-on acquisitions is also driven by the fact that there are strong margin enhancement opportunities in the cleaning and hygiene products sector, whilst these groups have strong balance sheets and can make multiple acquisitions in order to satisfy their demand.

PE investors are highly attracted to the cleaning and hygiene products sector due to strong performance in the sector, the attractive end market dynamics and differentiated product offerings. They also appreciate the defensible market position in these companies, as well as the fact that their formulations chemistries are associated with strong levels of cash conversion.

Europe has seen many new private equity investments in the cleaning and hygiene products sector including French private equity firm Azulis Capital acquiring Love & Green SA, French private equity firm BNP Paribas Developpement acquiring Groupe Unipex SA, Belgian private equity firm Copeba acquiring HG International BV, French private equity firm LBO France acquiring Eurotab Tabletting SA and UK private equity firm Mobeus Equity Partners acquiring Star Brands Ltd.

COVID-19 influences on M&A Activity

The global drive to develop solutions to tackle viruses points towards much collaboration in the years ahead, and we expect this to be reflected in significant M&A activity as players respond to the continued heightened demand for cleaning and hygiene products amid rising health and food safety concerns.

Two major deals which closed earlier this summer highlight these trends perfectly. One deal saw Kersia Group, a global leader in biosecurity and food safety and backed by French private equity firm Ardian, acquire Holchem Laboratories, a UK-based supplier of hygiene and cleaning products and services for the food and beverage, foodservice and hospitality industries.

During the pandemic, Kersia says both companies have refocused operations towards traditional products which have been most in demand, such as disinfectant and hand-hygiene solutions, while also continuing to support the rising demand for biosecurity protocols. Kersia specifically aims to improve the performance of the agricultural and food industries by preventing the spread of animal and human diseases, often caused by contamination in the food supply chain.

Kersia acquired Holchem from Ecolab, a global leader in water, food safety and hygiene technologies and services. Earlier this year Ecolab acquired CID Lines, a global provider of livestock biosecurity and hygiene solutions whose primary business offers a range of cleaning, disinfectant and hygiene solutions for pig, poultry and dairy farms.

we may see early stage, dynamic businesses in the sector grow as innovative products come to the market

Ecolab says larger herd and flock sizes, increasing protein production, reduced use of antibiotics, and more stringent regulations are resulting in greater demand for livestock and poultry biosecurity and hygiene expertise and solutions that help ensure animal health and prevent the outbreak of diseases.

As the pandemic shifts personal hygiene toward a daily priority we expect cleaning and hygiene chemicals specialists to continue to perform well, and we may see early stage, dynamic businesses in the sector grow as innovative products come to the market. All of this sets the market up nicely for PE investment opportunities and continued consolidation by larger groups.

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