2021 - An SME Outlook
Matt Dixon • Jan 28, 2021
Against a backdrop of unprecedented disruption, there are likely to be transformative opportunities for strategically-minded SME chemical and life science business owners.
2020 was a testing period for all businesses, but the impacts of the global COVID-19 pandemic were not felt uniformly across the chemical and life sciences sectors. Some sectors suffered whereas others benefited, not always predictably so.
Large international conglomerates with diversified product offerings and end-markets were generally better able to weather the storm of financial and operational disruption. Smaller, often owner-managed specialty businesses with high sector focus were more likely to face greater extremes of threat and opportunity.
Turning the corner into 2021, the forecast – though more optimistic – remains unclear. On one hand many countries around the world continue to operate under varying degrees of lockdown restrictions, while on the other the commencement of vaccine roll-out programmes appears to offer a light at the end of the tunnel.
However, despite the ongoing uncertainty, there are signs that 2021 will offer a rare combination of market factors which could present exciting opportunities to SME owners that can carve out time from fire-fighting to take the initiative.
Backlog of existing opportunities
The experiences of CCD Partners’ clients across 2020 was broadly typical of those of many across the market, with many deals facing completion delays caused by the physical and legislative disruptions of the pandemic.
Despite innovations including virtual site tours and interactive video calls, without in-person inspection of assets, buyers were (and still are) reluctant to proceed.
As well as impacting M&A processes, restrictions on movement and a shift of priorities towards fighting the pandemic have also had many other knock-on "slow-down" effects. For example, regulators have de-prioritised inspections of non-Covid-related sites, holding back the approvals essential for many products to be manufactured and sold.
Furthermore, the billions of "dry-powder" private equity capital has not gone away. Investors are sensibly cautious where to deploy their funds but ultimately they need to use it or lose it.
The cumulative effect of these and similar factors has been the accumulation of an an ever-increasing demand vacuum for products and services as well as M&A and investment.
Emerging new opportunities
The pandemic has also created a raft of new opportunities.
Business leaders are being forced to re-assess their strategies, looking at entering new markets or exiting old ones, paring down non-core operations and optimising what's left. Each of which may require acquisitions, divestments, investments, or new talent.
We are also aware of previously steadfastly independent businesses now opening up to collaboration/M&A due to financial or market pressures.
Getting ahead of the curve
With lead times on M&A and investments spanning anywhere from six months and up, business leaders and investors are not sitting patiently waiting for the pandemic to pass.
Instead, as evidenced by CCD Partners’ significantly increased volume of inquiries in 2020, business leaders and investors have made the most of the enforced ‘downtime’ of the pandemic to put in the groundwork to be ready once conditions improve.
We have been working with clients to assess the shifting markets, define their best strategies, and engage with potential target acquisitions, partners, and investors so that our clients are first in the queue once the markets open up and deals can be completed again.
Lockdown and closed doors are hiding a hive of activity.
Implications for SMEs
SMEs looking to sell or raise capital in 2021 are likely to face competition for the attention of buyers and investors juggling a backlog of existing deals with varied new opportunities.
This means it is more important than ever to build a compelling narrative that explains why your business will transform their business to fit with their objectives and to make engagement with you as painless and low-risk as possible.
Some examples of our recent work in this regard include:
- showing how recent disruption has accelerated certain markets meaning opportunities we all thought were 10 years away are now 5 years away
- clearly explaining the adverse but temporary impacts of the pandemic on 2020/21 production/sales
- providing sensitivity analyses that show resilience to any further waves of COVID-19
In summary...
These unprecedented market conditions present exaggerated opportunities and threats to SME business leaders. The key to maximising value and avoiding being burned is to pro-actively prepare, understand the other side, and engage on your terms.
CCD Partners is a consultancy specialised in corporate transformations in small and mid-market chemicals and life sciences businesses.
To organise a call with one of our partners please email contact@ccdpartners.com
Receive M&A news relevant to your business
At critical moments our clients engage us to provide pre-publicity "off-market" intelligence to give them the edge over the competition - we also provide up-to-the-minute public or "on-market" intelligence for free
Contact Us
RECENT POSTS
Market leading provider of formulated chemical process aids and foam control, PennWhite has been acquired by Manali Petrochemicals, part of the AM International Holdings group.
Global source of industrial gas news, views, and debate, gas world has been sold by John and Karen Raquet to the senior management team in an MBO, backed by Mobeus Equity Partners.
Polyblend UK Ltd is one of the market leaders in PVC based polymers. We are experts in manufacturing a comprehensive range of liquid plastisol and dispersion systems, complemented by our Speciality Distribution business supplying plasticisers, resins and PVC additives.
GFBiochemicals is a sustainable chemicals company that produces levulinic acid derivatives at commercial scale directly from biomass. Having perfected its technology, product, and certification, the company is entering a new phase of commercialization.
In the latest episode of the Chemical Transformations podcast , CCD Partners' Managing Partner Matt Dixon speaks with Ted Clark, former President and CEO of Royal Adhesives & Sealants, discussing his new book "Shipping Clerk to CEO: The Power of Curiosity, Will, and Self Directed Learning”. The book tells the story of Clark’s remarkable career journey from entry-level worker to CEO of a $240m chemical company by the age of 42.
Esteve Química purchases one of the UQUIFA Group's two pharmaceutical fine chemicals plants in Barcelona.
Specialty materials manufacturer Vertellus has acquired Polyscope Polymers B.V., a global leader in specialty additives for coatings, electronics applications, and engineering polymers.
Biosynth Carbosynth is a fully hybrid Research Products, Life Sciences Reagents and Custom Synthesis and Manufacturing Services Company with global research, manufacturing and distribution facilities. They are the supplier of choice for many in the pharmaceutical, life science, food, agrochemical, cosmetic and diagnostic sectors and manufacture and source a vast range of chemical and biochemical products.
Steve Allin co-founded Charnwood Molecular with Phil Page in 1998. 22 years later, the business has evolved dramatically from its origins as a spinout of Loughborough University. Backed by a partnership with Synova Capital, the company is now preparing to move into a former AstraZeneca research facility and has already completed its first M&A deal, acquiring Aurelia Bioscience in summer 2021. CCD Partners’ Matt Dixon spoke with Steve about the journey from full-time academia to running a high-growth market leader.
Aspire was founded in 2009. Aspire has an asset-light business model that focuses on R&D, business development and sales and marketing, while outsourcing manufacturing and distribution to specialist third parties. For more details see www.aspirepharma.co.uk.
CCD Partners
Insight | Network | Execution
We are a network of multi-disciplinary specialists united in the common purpose of identifying and delivering the full potential of innovative and impactful chemicals and life sciences businesses.
Get In Touch
