Companies that are keen to expand their market footprint in a thriving sector may want to turn their attention to the adhesives market. The UK currently boasts the fourth-biggest adhesives market in Europe, achieving a net worth of almost USD1.7 billion last year. What’s more, by 2028 this figure is expected to grow to over USD 2.1 billion, representing a CAGR of 5.96% – and making the adhesives sector of undeniable interest to potential investors.
But what important factors should you consider as you embark on an acquisition within this market, and how do you make such an acquisition to begin with?
Those are the pressing questions we’re about to answer in this essential guide to investing in adhesives!
Pros and cons of buying an adhesives business
Before we look at the finer points of taking over an adhesives business, it’s important to weigh up the benefits and the downsides of this kind of investment.
Advantages
Perhaps the biggest benefit of expanding into the adhesives market is the growth trajectory we’ve already mentioned. Subsequently, as demand for adhesive products of various types continues to swell, there will be more opportunities for businesses within this sector to expand and generate higher revenues.
On a related note, as various industries continue to innovate, there is likely to be an expanding customer base for adhesives businesses – as well as plenty of motivation for those businesses to innovate themselves and create pioneering new adhesive products. Notably, there is a shift in demand toward more eco-friendly products so this could become a profitable – and sustainable – pipeline to pursue.
With such steady – and growing – demand, another advantage to taking over an adhesives business is the resilience of the sector. While the market may, of course, fluctuate, the demand for these products should hopefully remain consistently high enough for companies to stay afloat, even in more difficult economic periods.
Disadvantages
Now you know the upsides of investing in this sector, it’s time to ponder some of the negatives.
Perhaps the biggest con of buying an adhesives business is the cost. Not just the initial upfront cost of making the acquisition, but also the costs you will have to pay further down the line. Adhesives manufacturers require skilled employees, industrial mixers, heating and cooling equipment, storage tanks and laboratory equipment. As a result, buying a business of this kind can come with some substantial overheads. Not only will you have to pay for repair and maintenance of this equipment, but you will also have to potentially hire and train skilled technicians. Finally, you also need to consider your supply chain, and the costs of the raw materials required to make the products.
Speaking of making the adhesives, quality control is of vital importance in this sector, which means you need to be well-versed in the regulations governing their manufacture. If you’re new to this industry then, in other words, you’ll have to get ready to do some extensive research before making your acquisition.
Special considerations
The latter point brings us on to a vital consideration for anyone embarking on an adhesives acquisition.
Because the quality of your product is so important, it is vital that you stick to a rigorous testing program during the manufacturing process. Any failings in this regard could potentially bring serious problems in their wake, not least a loss of the brand’s reputation. As a result, if you’re taking over ownership of the business, you need to make sure the quality standards don’t slip during the transition phase.
You should also be thinking about where you want to take the business in future. As we’ve already mentioned, new eco-friendly adhesives are increasingly in demand, so you may want to think about apportioning some funds for research and development in this area.
Finally, marketing your products is essential. If the business you’re taking over doesn’t have a robust marketing strategy, then you’ll need to start implementing one. This may require the hiring of a dedicated team or outsourcing to different freelance professionals such as web designers, content creators and copywriters.
How to acquire an adhesives business
If you would like to proceed with your acquisition and plant a firm foothold in the adhesives market, read on for a helpful overview of the M&A process so you will know what to expect.
1. Choosing a prime target
The first step, of course, is to source and narrow down the most suitable adhesives targets for purchase.
Because this is such a specialist market, it might be worthwhile to hire a business broker to help you find and verify potential adhesives companies that match your ideal acquisition profile. Business brokers like our team here at Harris Acquire have an extensive network of contacts spanning various sectors, so are perfectly positioned to help you find the right sort of companies.
Once you have narrowed down your preferred candidates you can ask for valuations, so you start off with a good idea of their genuine market value. Again, a business broker can assist you by conducting the valuation themselves.
2. Negotiating an initial agreement
When you have chosen an adhesives manufacturer you would like to purchase, it’s time to proceed to the negotiation stage. This part of the acquisition process allows you and the seller to create an initial heads of terms agreement, settling key terms for the proposed deal.
Being able to agree on the primary points of the acquisition before any legally binding documents are signed will help you and the seller achieve a more streamlined and value-enhancing sale.
3. Due diligence
The next step, following negotiations, is due diligence. During this part of the M&A process, you’ll be given access to all your target’s vital documentation, which provides you with in-depth look at how their operations.
This part of the acquisition is arguably most crucial as it should hopefully provide you with all the information you need to help you make an informed decision about purchasing the adhesives business.
Don’t be tempted to skimp on your due diligence, no matter how keen you are to close the deal, as if you do, you run the risk of missing something crucial.
4. Sealing the deal
If you complete your due diligence and you’re satisfied with everything you’ve seen and feel that the adhesives company is the right fit for your portfolio then it’s time to close the deal!
Your legal team can draw up the final contracts, and you can focus on the next chapter and how to orchestrate a smooth and stress-free integration of your new business.
How Harris Acquire can help
As we’ve mentioned, having a business broker to assist you with your adhesives purchase can be a huge help. Besides helping you source and vet potential targets and carrying out valuations, a tried-and-trusted business broker like Harris Acquire can provide comprehensive assistance at every stage of the M&A process.
This ranges from filling out crucial paperwork to sorting NDAs, helping with negotiations and due diligence, and offering insider tips and advice on how to achieve a streamlined integration.
What’s more, here at Harris Acquire we provide an exclusive Acquisition Finder pilot which includes a 30-day money-back guarantee for your peace of mind.
To find out more about this pilot and how we can help you achieve your acquisition goals, don’t hesitate to give us a call on 01926 757100 or send a query to Hello@harrisacquire.com.
