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Spanish manufacturer of technical plastic compounds

Acquisition of a majority stake in REPOL by the Japanese multinational UBE Industries THE VECTOR COMPANY advised REPOL in the transaction

General Overview

REPOL was a private owned company involved in manufacturing technical plastic compounds (PA6, PA66, PP, POM, PC…), with a modern facilities and a high expertise in the sector developed since 1975.

Due to its growth, its market position and recognition, the company began to be very visible to the rest of the players and the multinational companies. REPOL could be a good partner for the development of value-added technical solutions for plastic compounds, both for injection and extrusion.

Strategic Rationale

UBE Group had positioned the PA6 business as a growth segment, driving both extrusion applications (where the company’s products have a competitive advantage) and injection moulding applications into the market.

The transaction would allow UBE:

  1. a complementarity position in the PA6 market
  2. access to REPOL’s compounding technologies and its capacities to develop products with resins that do not use PA in their composition.
  3. the incorporation of REPOL’s recycling technologies, an asset for future commercial development in the face of stricter environmental regulations regarding plastic packaging materials.
  4. UBE Group could also expect to get synergies with its operational plants in Japan and Thailand, and to accelerate the development of compounds for injection moulding applications in the automotive component sector and other industries where REPOL was an active player.

Key learnings

In businesses where the main raw material is a commodity traded on international markets that may suffer significant market price variations over the years, it is important to take a view of the gross margins on an averaged basis over a number of years.

When both parties (buyer and seller) are properly advised by M&A experts, and are actively seeking a mutual understanding, the timings for closing the transaction are considerably reduced andat the same time the probability of success increases.

In transactions based on the acquisition of an industrial businesses made by a multinational player of the sector, the technical, technological and operational part of the due diligence process becomes a key part of the process. This mentioned part of the due diligence has to be especially faced by the seller and is used to be carried out by the buyer with its own internal team (while the rest of the due diligence, such as the financial, legal, tax, labour and commercial due diligence, is usually subcontracted to independent advisors that are very specialized in each area)