“A due diligence is like a medical check-up”

What criteria do companies have to meet for Sika to carry out an assessment in the first place?

First we check if the company is a good strategic fit and if the financial parameters meet our requirements. Then – and only then – do we take the acquisition process further. With takeovers, we want to tap into new geographic markets, expand our technologies in a logical way, improve market access, expand our distribution channels, and gain access to new projects or customers. 

How do you identify possible takeover candidates? 

Acquisitions are part of Sika’s DNA. A great number of ideas stem from our local and regional organizations. Typically these are what are known as “bolt-on” transactions, i.e., acquisitions of small to medium-sized companies with annual net sales of roughly CHF 50–60 million. I would estimate that some eight out of every ten of these targets are brought to our attention internally. In the case of major acquisitions – such as MBCC, Parex, Hamatite, etc. – the seller or owner initiates contact directly at Group Management level, or Sika receives an approach from an investment bank. 
 

Sika develops acquired companies further. This is an attractive aspect for companies looking for a succession solution and wanting reassurance that their organization will end up in good hands. Do you often receive offers of this kind? 

Yes, very often. The issue of succession is a key theme for small to medium-sized companies. As a strategic buyer with a long-term mindset, Sika can put forward strong arguments in discussions of this kind, and this is what makes the difference for many owners. For example, we can credibly demonstrate that we target shared success, want to maintain existing sites, and care about the well-being of employees. 
 

What are the key objectives of a due diligence?

It is comparable to the medical check-up that a professional soccer player has to undergo before moving to a new team. Due diligence is carried out for the same purpose:   

Does the due diligence also cover Environment, Health, Safety (EHS) aspects?  

Yes, EHS is very important and has become much more significant in recent years. First, experience has shown that this is where the biggest financial risks are – for example, soil contamination. Second, health and safety are areas that are heavily shaped by the company’s values. We want to be sure that these values are compatible with Sika’s core values. 
 

Does this mean that a successful company will not be acquired if its values do not align with Sika’s values? 

Every acquisition must be analysed and considered as a whole. Values are just as much part of the comprehensive assessment as EHS and ESG (Environmental, Social, Governance) considerations. They are very much “top of the list” because we want to integrate acquired companies as quickly as possible, also establishing our DNA in the process. That is easier when the corporate culture is similar to ours. Ultimately, all the elements have to be right for us on balance.

Only around 6–8% of companies make it through the multi-stage selection process to acquisition. How does the process work, and who takes the decisions in the individual steps?  

With our Acquisition Policy, we have set out a clearly structured process within the Sika Group that defines both the individual process steps and the responsibilities involved. All potential acquisition candidates, without exception, are subject to a thorough review before we acquire them. 

The decision as to whether or not we go ahead with the acquisition lies with the Group Management and/or the Board of Directors.  
 

What are the most important insights gained from the acquisition of MBCC?

From my own personal experience, I can name two. First, it confirmed once again that M&A is teamwork. You need a well-functioning, proficient team – from top to bottom – that is completely aware of the individual steps and responsibilities involved in the process and is also ready to go the extra mile. Second, perseverance is a must. Acquisitions of this size and complexity always involve challenges. You have to have patience and consistently move forward. MBCC was well worth it. Shortly after the closing, we were able to increase our synergy expectations from the initial prediction of CHF 160–180 million to CHF 180–200 million.
 

What are the key factors when it comes to determining the takeover price?

The price is first and foremost determined by the attractiveness and profitability of the company, and by the extent of the synergies that are likely to be achieved through the transaction. But at the end of the day, any purchase of this kind also comes down to negotiation. It is important to position oneself correctly, and to negotiate fairly but also consistently. Once agreement has been reached on all points the acquisition can occur very rapidly. 
 

How does Sika manage to consistently create value from its acquisitions?  

That is an interesting question. I think a lot of it comes down to the fact that Sika is a strategically oriented buyer that believes in the long-term success of the companies it acquires. We want nothing to do with the “slash and sell” approach. That is not our style.

We want to successfully develop acquired companies further and grow together with them – this is our DNA. Our goal is always a win-win situation that benefits both sides: Sika through access to new customers or technologies, and the acquired company through Sika’s global market presence and R&D capabilities. This opens up new growth opportunities, which likewise enhance value, as does the more efficient use of organizational structures.
 

With MBCC, Sika expects run-rate synergies of CHF 180–200 million by 2026, of which 35% is to come from revenue synergies and 65% from cost synergies. Could you please elaborate on that?

In all acquisitions, there are essentially two synergy areas that can be identified: revenue synergies and cost synergies. In the case of the MBCC transaction, we estimated the synergies on the cost side to be higher than those on the revenue side. This is due to MBCC’s operating structures being very similar to those of Sika. The optimization of production networks leads to efficiency increases. Greater purchase volumes improve our negotiating position in procurement, and we can achieve savings on the materials side through the tweaking of product formulas. On the revenue side, we expect synergies from cross-selling, i.e., the sale of Sika products through MBCC sales channels and vice versa.
 

How does Sika finance its acquisitions?

We finance small and medium-sized transactions through our operating cash flow. In the case of larger acquisitions – such as MBCC – we turn to the capital market for the financing. Here we benefit from our robust balance sheet and our strong “A-” S&P credit rating.