Last week (6 February) Iberchem announced it has taken control of Malaysia’s Flavor Inn Corporation and China’s Duomei. The businesses will be integrated into the company's flavours unit, Scentium. Financial details of the transactions were not disclosed.
CEO Ramón Fernández said that the deals will expand Iberchem’s Asian footprint. “This announcement represents another key step in the strategic expansion of Scentium in Asia,” he noted.
The acquisitions are the latest advance in Iberchem’s M&A strategy, which hit the ground last year with the purchase of South Africa’s Versachem. And, corporate communications chief Guillaume Audy told FoodNavigator, the company remains on the hunt for more deals. “Our M&A strategy will continue in 2020 and more.”
According to Audy, M&A is a 'strategy to be considered' when faced with consolidation in the flavours and fragrances space. "We have had many examples along 2019 in the F&F sector," he noted.
2019 deals included the merger between DuPont Nutrition & Biosciences and International Flavors & Fragrances (IFF) to create a €40bn nutrition and flavour business; Firmenich’s 17% stake in French fragrance and flavour supplier Robertet; and Givaudan’s purchase of US-based fragrance and flavour house Ungerer.
What is Iberchem looking for in a target?
While all the acquisitions completed since Iberchem launched its aggressive M&A strategy – and since the start of the group’s financial relationship with European private equity firm Eurazeo in 2017 – have been in emerging markets to date, Audy said the group is looking for target companies globally. “Even though Iberchem is organically more active on emerging markets, our M&A strategy does not only focus on these markets,” he explained.
The company is seeking out companies that are a good fit for its corporate model, Audy continued. “Iberchem has a unique business model with a fast-to-customer strategy. We are obviously looking for companies with a business model and commercial approach in line with ours.”
According to Fernández, both Flavor Inn and Duomei fit the bill: “Both Duomei and Flavor Inn share Scentium’s customer-centric culture and values. We are expecting a smooth integration of their activity into our organization in the upcoming year.”
In order to ‘add value and expertise’, Iberchem - which already has a presence in more than 120 countries - is also looking for companies that provide it with access to new markets, technologies, capacity or IP. For example, Audy noted, the 2018 Versachem deal allowed the company to enter the colours sector, while both Duomei and Flavor Inn boast ‘expertise specific to the local market complementary to our existing [presence]’.
45 years of double-digit growth
While M&A is one part of Iberchem’s growth strategy, organic sales gains are another.
For 2019, the Spanish flavours and fragrances company reported a 19% jump in revenue, which rose to €174m. This was achieved despite the ‘aftermath’ of the raw material crisis that ‘shook’ the F&F industry in 2018, Iberchem noted.
“Despite benefiting from double digit organic growth, M&A helped us accelerate our expansion and access new market segments,” Audy reflected.
Iberchem said that its profitability rose throughout the year and the company again increased its capital expenditure programme. Last year, it completed the construction of a new R&D centre and ‘fully revamped’ its flavour production plant in Spain, a move that is expected to increase flavour offerings by almost 40%.
Since 1985, Iberchem noted it has seen 'solid and uninterrupted double-digit growth', making it one of the fastest expanding companies operating in the F&F industry.