The managing director of a company we acquired exchanges ideas with the head of finance and controlling on financing and integration
Frank Wright is a biochemist who began his career as a technician in the food industry. Subsequently, he worked for the British chemical company Laporte Industries; parts of Laporte were sold to Rockwood. When BYK acquired Rockwood’s clay-based additives (CBA) business, he became a member of BYK’s management. He has been active as a consultant since 2017.
Oliver König is the head of Finance and Controlling at ALTANA AG. He began working at ALTANA as head of Investor Relations. After the ALTANA Group withdrew from the stock exchange in 2010, he became a member of the corporate controlling team, which he headed until 2016. After a stint as head of the Group Treasury, he is now in charge of finances and controlling at ALTANA’s holding company.
Mr. Wright, in 2013 ALTANA acquired the rheology business of the U.S. company Rockwood Holdings Inc. You were responsible for this area at the time. What were the most important reasons for the sale?
Frank Wright: In Rockwood’s view, the time was ripe for finding a buyer that could push ahead the attractive business, which would require further investments in research and manufacturing. It was also important that the buyer could offer the employees a perspective for the future, which was something ALTANA could do. I think that the business area was very compatible with what ALTANA was seeking at the time, namely, to strengthen its international rheology business. In addition, there were synergies and cross-selling potential. Last but not least, the acquisition offered ALTANA access to new business fields such as the oil and gas sector.
Mr. König, what was ALTANA’s perspective?
Oliver König: In addition to strengthening its rheology business and expanding to the U.S., other important factors were the possibility to enter different markets, raw materials, manufacturing technologies, above all in the oil and gas sector. With Rockwood’s rheology business we could advance our diversification strategy. Why? While rising oil prices and the resulting higher raw material costs could burden the profitability of our core activities, ALTANA’s oil and gas business benefitted from this development due to the increased mining activities.
How did the integration work run?
Oliver König: Very well! It was the second-biggest acquisition we had made at ALTANA hitherto. And we have made many. Nevertheless, the integration into the BYK division generally ran smoothly. The secret of our success? Our employees! I remember a great welcoming video consisting of personal messages from employees around the world. The comprehensive cooperation announced during staff meetings at the new sites was reflected in the structure of the integration process. The subprojects, which ranged from IT and purchasing to R&D, were jointly led by a manager from BYK and the former CBA.
Frank Wright: It quickly became clear that we at Rockwood were not competing with ALTANA. The employees saw the advantages of being part of a strong group of companies. At an early stage, the top management informed the staff at employee meetings at the four Rockwood sites that ALTANA was investing in the company to grow its business. The employees were given a convincing perspective. ALTANA’s values were also discussed. This was a new experience for the employees and bolstered their commitment. From then on, nearly everything ran smoothly in the integration work.
What role does innovation potential play for an acquisition?
Oliver König: Innovation is our most important growth driver. Our own research and development plays a decisive role. But we can accelerate this growth by acquiring other innovative companies or parts of companies.
Does ALTANA favor internal or external financing when it makes acquisitions?
Oliver König: Our own financial strength is very important to us. So we observe and manage it continually with our controlling instruments: liquidity, balance-sheet, and earnings planning. On this basis, we can quickly draw up a financing plan.
And when you have decided on an acquisition …
Oliver König: … then we usually first use our internal financial strength from existing operating cash flow for the acquisition. Operating cash flows of 300 to 400 million Euros a year give us enough leeway to do so. In 2017 alone, we took over five businesses and technologies and financed them all from our cash flow. In the case of bigger acquisitions, we rely on mediumterm financing instruments such as credit facilities and promissory loans.
What about non-financial aspects?
Oliver König: The most important thing about an acquisition is the employees. We have to ensure that the top performers stay on board and are ready for integration. Because we can’t be successful without them. And that has to do with the corporate culture. In the due diligence process, when the pros and cons of a transaction are examined, non-financial parameters are also important, especially when it comes to environment, safety, and health. We check to see exactly how our non-financial targets are influenced by an acquisition.
Alongside employees, there are other stakeholders such as suppliers, customers, and neighbors …
Frank Wright: … exactly. Their needs should not be underestimated. Some stakeholders didn’t know who ALTANA was. So we described ALTANA in more detail to people locally, its tradition, values, working conditions, and plans for the future. It is extremely important to explain to local decision-makers what improvements there will be for them.
Oliver König: Ultimately, it is important that we can create value at relevant stakeholder levels. It is essential to know that ALTANA has a long-term orientation. We want our business to continue to grow in the future and thus create value for the different stakeholder groups. When ALTANA comes aboard as the new owner, this should give the important stakeholders a good feeling.
The rheology business was successfully integrated into the BYK division, making BYK one of the world’s leading suppliers of rheology additives. With the help of these additives, the flow behavior of all kinds of materials can be optimized.
EXPANDING OUR RHEOLOGY BUSINESS
SECOND-LARGEST ALTANA ACQUISITION
By acquiring the rheology business of Rockwood Industries, the ALTANA Group pushed ahead its consistent orientation to growing specialty chemical markets, strengthened its additive portfolio, and opened up new growth fields.
635 MILLION U.S. $ INVESTMENT