At the ripe old age of 109, Denmark’s Hempel is preparing for a growth spurt.
The maker of Farrow & Ball paint and Olympic yacht-coatings, based on the outskirts of Copenhagen, today announced it is joining forces with CVC Capital Partners. One of the world’s largest private equity funds, with EU186 billion in assets under management, CVC will become a strategic investor.
It’s a huge change for a company that for the past 75 years has been solely owned by the philanthropic Hempel Foundation. But nobody can accuse Hempel of rushing into this: the search has been underway for a good while. Key to the CVC deal was getting the foundation onboard with a pledge that its share of the group will become more valuable, in turn enriching its charitable work, CEO Michael Hansen said in an interview with chemicalESG.
“It’s a very complex transaction and, therefore, we’ve taken the time necessary to cross the t’s and dot the i’s,” Hansen said.
What has been rapid are the changes sweeping across the wider coatings-and-paint industry. Historic companies like PPG Industries are reassessing where they want to play, to the extent that the US company is exploring a sale of its whole North American architectural paint business, including the iconic Glidden brand. Even what is the best go-to-market model — whether via DIY chains or own stores — is up for discussion.
So Hempel feels it’s a good time to hook up with CVC. Of the “many” different PE funds that it engaged with, CVC was the one that stood out, both from a cultural and a shared business mission perspective, Hansen said.
Once closed, the deal brings an upfront equity check when CVC acquires a first tranche of shares in Hempel. Since joining in October 2022, Hansen has been on a mission to improve performance — results hit a record last year — and the proceeds will help Hempel invest in organic growth like developing new sustainable technologies.
But Hempel wants to hit hyperdrive and break into the top 5 or 6 players in the industry by the end of this decade. That means reaching a target of EU6-8 billion in sales, up to triple what they were last year, and something that can only likely be reached by M&A.
“When we project into the future, we see an industry that continues to consolidate and where the scale element of leadership becomes more and more important. M&A is a strategic journey. The partnership with CVC will enable that to a much greater degree. This is what they do for a living.”
Hansen said Hempel’s four main buckets of decorative paint, marine, energy and infrastructure are the prime areas for acquisitions. CVC will be actively engaged in identifying the right targets, negotiating, and implementing deals. Hempel isn’t ruling out entering a totally new segment, but only if it can be a leader, he added.
The typical private equity investment period of four to five years doesn’t apply here. CVC is using its Strategic Opportunities platform, which takes longer-term view on returns. For now, at least, the topic of an exit isn’t foremost in anybody’s mind, according to the CEO.
“Ultimately, there will be an exit. How that exit will pan out, I don’t know. It’s not that I don’t want to talk about it, but I think neither CVC, the foundation or me can be specific about it.”
Clearly an IPO is one option, but Hansen stressed it’s not the only outcome.
“We have a range of options available to us when that day may come, but again the timeline is unknown. An IPO is one of them, or it could also be a sale to another institutional investor. There’s nothing precluding us from keeping our options open and ensuring that, when the time comes, we make the best possible choice for all owners.”