“Axalta will likely remain an acquisition target“
Sherwin-Williams and Valspar are selling off their North American wood coating business to Axalta. But what is the impact on the wood coating market and how will it affect Axalta's position on the market? We spoke with Ellen Kriz, Industry Analyst at The Freedonia Group.
What’s the deal’s impact on the wood coating market?
Ellen Kriz: The acquisition of Valspar’s Industrial Wood Coating business will position Axalta as a top 5 company in the US wood coating market. Since Axalta’s wood coating business is currently small, the deal will not result in further industry consolidation. Axalta will essentially take the place of Valspar. Sherwin-Williams will still acquire Valspar’s consumer wood coating business, though, which will strengthen its position as the wood coating leader in the US.
How will the merger impact Axalta as an acquisition target?
Kriz: Axalta will likely remain an acquisition target as industry consolidation continues. Axalta has pursued its own program of acquisitions over the last several years as a means of expanding its market share. The Valspar deal is Axalta’s third acquisition already in 2017, on top of others in 2015 and 2016. The company is looking to broaden its industrial coatings range while reinforcing its core automotive coating business. This may also make it a more valuable prospect for acquisition, as long as it is not taking on too much debt.
How do you rate the ongoing consolidation in the coatings market?
Kriz: Sherwin-Williams’ pending acquisition of fellow market leader Valspar highlights the high degree to which coatings companies rely on acquisitions to expand their market share. Even though Sherwin-Williams is gaining only a portion of Valspar’s wood coatings business, the acquisition still widens Sherwin-Williams’ geographic presence and distribution capabilities significantly. I expect consolidation activity to continue as other market leaders attempt to respond to these new dynamics.
Further information
You can read a more detailed analysis of this deal in our current issue of the European coatings journal. It is also available online for subscribers in our online library.
