BARCELONA (ICIS) – Maroon Group is a mid-sized specialty chemical distributor which, through the acquisition of U.S. Chemicals, aims to move upstream into a new market sector – specialty intermediates.
It was in May 2016 that Maroon Group – with 2015 sales of $156m – made its debut into this new market segment through the purchase. Previously Maroon had been focused mainly on products serving the CASE (coatings, adhesives, sealants, elastomers), graphic arts and thermoplastics markets.
The move was the latest in a series of acquisitions by Maroon whose owners, Cl Capital Partners, see the group as a platform to grow in the specialty chemicals distribution segment. Cl Capital Partners bought Maroon Group in 2014.
According to chief technology officer, Mark Maroon, there is just as much opportunity in vertical market segments beyond its core such as personal care, cosmetics, food and beverage, pharma and specialty intermediates.
“Part of Maroon Group’s strategy is growth through acquisition. The specialty chemicals distribution industry is very fragmented and we see opportunities to take advantage of that and leverage principal [supplier] relationships in the US.”
The group sees this acquisition as a logical next step as it grows further into the specialty chemicals space.”U.S. Chemicals is very important to us to create a beach head into that [specialty intermediates] vertical to grow. We will apply the same strategy and look for other similar acquisitions either geographically or by synergistic product lines to augment the portfolio of U.S. Chemicals.
He sees synergies in terms of customers: “Often their and our customers are similar. We might sell a finished polymer for coatings; U.S Chemicals might supply the intermediate specialty to the polymer producer. They are one step upstream.”
Of U.S Chemicals customers, approximately 10% will be similar customers to Maroon, but 90% will be brand new.
Maroon Group aims to provide U.S. Chemicals with investment capital to expand in size and scope thus growing organically at a faster pace than it could do as a stand-alone company.
Discussions are already underway to add to the U.S. Chemicals sales team. The group also now has access to 30 Maroon Group account managers.
Jenny Anderson, U.S. Chemicals sales manager, said: ”We currently have a sales team of five and are looking to add at least two in the near term. Chicago, New jersey and Texas would benefit from having incremental resources. In terms of future acquisitions, the west coast also offers opportunity for growth.”
BUSINESS MODEL FIT
When Maroon Group was evaluating the specialty intermediate space for acquisitions, it was really important for the company to find the right first partner.
”We needed a company which was first-in-class in this niche. Brand awareness is the single most important aspect and that logo carries a lot of value in the US marketplace,” said Maroon.
Maroon could also see that U.S. Chemicals was a good fit from a business model perspective as it offered the service and support to act as a sales and marketing arm for its suppliers.
Anderson explains: ”We pride ourselves on maintaining strong and rich relationship with our supply partners. In many cases we operate as the sales and marketing arm for suppliers where we have an exclusive arrangement for the US market, and act as an extension of the producer.”
The group aims to bring a level of local, responsive, adaptive service that both suppliers and customers alike value.
She adds that beyond core material and service offerings, when customers say they are having a unique challenge then: ”We get creative and entrepreneurial to try to address their needs with sometimes ‘out of the box’ kind of thinking.”
U.S. Chemicals also offers a lot of manipulation of product to help customers manage a complex supply chain. If a company has a unique batch size or packaging requirements the group can repackage and customise for them.
This includes blending and micronising products to meet specific requirements.”This helps customers gain an advantage in the marketplace and reduce complexity in their supply chain,” she says.
The group also markets some higher demand customised products under its own trade names. There are suites of “affinity” products allowing it to offer multiple products for single applications. “Customers know they can source their materials from one place, with one call.”
According to Maroon, it is much easier to integrate teams which have shared culture and values. The company does not look for big synergies by removing people and instead aims to integrate systems and invest in people and other infrastructure improvements.
Maroon has plans for more inorganic growth across its portfolio. “We have an active pipeline with potential sellers where serious discussions are taking place. One of those is in the U.S.Chemicals space. It is our goal to close at least one more acquisition during 2016,” says Maroon.
Meanwhile, U.S.Chemicals’president, Carol Picarro, remains an active leader within the group after selling to Maroon. Anderson says:”Carol nurtured my skills to enable me to grow into this leadership role with U.S. Chemicals over the past four years including naming me as sales manager. I’d like to do my part to encourage more women to thrive in this industry.”