Trent Myers, Contributing Writer
The coatings industry in North America has been consoli- dating for decades, to the point that in certain end mar- ket segments, fewer than ten players – and in some cases,
five or less – control over 90 percent of the market, and in most
other markets, the level of concentration is at least 75 percent.
For the industry in total, the American Coatings Association and
ChemQuest Group have estimated that the top ten manufacturers
represent nearly 75 percent of total industry revenues and that the
next ten represent about another 10 percent of the market.
Some sectors of the coatings industry are beginning to resemble the structure of the automobile, tobacco or defense industries, where a handful of global or super national behemoths
have achieved large economies of scale, such that they control
the vast majority of the market and are beginning to squeeze
out, or more likely acquire, the remaining players.
In coatings, this trend toward concentration at the very top
became especially evident about a decade ago, when Sherwin-Williams participated in an auction in an attempt to buy
SigmaKalon, then the second largest coatings manufacturer in
Europe. Sherwin-Williams has a storied history as a successful
buyer of coatings businesses, with a record extending back as
far as the late 19th century. SigmaKalon would have been the
largest acquisition in its history, providing it with much needed
diversification away from its dependence on architectural coatings in North America. It therefore must have come as a disappointment when Sherwin Williams lost that auction to PPG,
which paid over $3 billion for SigmaKalon.
Sherwin-Williams tried again in 2012, when it reached an
agreement to buy Comex S.A., Mexico’s largest paint compa-
ny, for $2.34 billion. Without a doubt, Comex was a nearly
perfect strategic fit: with a heavy emphasis on selling Comex
branded products through a network of 3,300 independent
owner-operated franchise stores throughout in Mexico, Comex
was in essence a Latin American version
of Sherwin-Williams. In fact, the deal
may have been too much of a perfect
fit, at least for Mexican regulators who
blocked the deal on the grounds that the
combination would have given Sherwin-
Williams over 50 percent of Mexico’s
architectural coatings market. Sherwin-
Williams did receive a (much smaller)
consolation prize of sorts, managing to
acquire Comex’s U.S. and Canadian op-
erations for $165 million, which includ-
ed 314 company-operated stores and five manufacturing plants.
That left Comex’s remaining Latin American operations in play,
and sensing an opening, PPG reached an agreement to acquire
the business within three months after the Sherwin-Williams/
Comex deal fell apart. PPG paid $2.3 billion, essentially the
same price that Sherwin-Williams originally had agreed to pay
for the whole of Comex.
At the time, PPG was in the process of realigning its business
units to focus on paint and coatings, with acquisitions and di-
vestitures of non-core businesses as the primary means of imple-
menting this strategy. Over the years, it had built up its coatings
business through the acquisition of many smaller firms, but the
most significant step in this direction after Comex was its pur-
chase of AkzoNobel’s North American architectural coatings
business in early 2013. The transaction, valued at $1.05 billion,
included all of Akzo’s architectural coatings manufacturing and
distribution facilities, paint stores, and product lines in the U.S.,
Canada and the Caribbean. The acquisition gave PPG 600 com-
pany-owned paint stores (the former ICI Glidden stores) as well
as access to 10,000 additional points of distribution, including
big-box home centers, mass merchants and independent dealers.
An industry expert explains recent merger and acquisition activity in the paint and
coatings industry.
Rivalry at the Top?
Growing Concentration
in the Coatings Industry
Trent Myers
