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HZO Featured in Mergermarket Publication

The following article was written and published by Mergermarket, the leading provider of forward-looking M&A intelligence and data to M&A professionals and corporates around the world. 

HZO interested in acquisitions; focuses on diversification and innovation in short term

01 Apr 2020

HZO, a Raleigh, North Carolina-based provider of protective nanocoatings that make electronics corrosion and liquid resistant, is interested in acquisitions, Chief Commercial Officer Stephen Gold told Mergermarket.

The company is ready to take advantage of market opportunities as they arise, Gold said. It has a list of candidates on its radar and while some talks are taking place, there is nothing concrete in the pipeline at present, he added.

Since being founded in 2011, HZO raised a total of USD 225m, of which approximately USD 180m is equity, Gold said. The company is profitable, he added, but made clear that the focus is on growth.

The executive said that deals would make sense to enter new business segments and to further broaden HZO’s technology portfolio. He noted that the location of the target is not relevant and preferred not to provide information on the desired size of potential targets and on the company’s budget for acquisitions.

Gold added that HZO does not have an M&A advisor and identifies its candidates through the network of its management and its customers.

On 16 March, HZO appointed James Fahey as chief executive officer. He joined the executive leadership team that consists of Gold, William McCombe (Chief Financial Officer), Dirk Cartus (EVP, Sales), Zsolt Pulai (EVP, Technology), Andreas Morr (Chief Operations Officer), and David Gilbert (EVP, Human Resources). Prior to HZO, Fahey held leadership positions at Dow [NYSE:DOW], DuPont [NYSE:CTA-A], Rohm & Haas, and IBM [NYSE:IBM]. He led the integration of Dow Electronic Materials, DuPont Electronics and Communications, and Dow Corning Electronic Materials, creating a USD 5bn entity with over 6000 employees.

In October 2018, HZO acquired UK-based Semblant, which specializes in protective nanocoating and waterproofing technology.

The financing of the deal will depend on its size and it will be put in place when the time comes, Gold said. He explained that the company could use cash, credit lines or rely on its very supportive investors.

HZO’s investors include Cathay Bank, Iron Gate Capital, Translink Capital, Delta Electronics [TPE:2308 ], Harris & Harris Group [NASDAQ:CME], Prudence Holdings, and VY Capital, as reported. He did not disclose the breakdown of the company’s ownership.

The company is well financed and at present does not have plans to raise additional capital, Gold said. If HZO continues on its growth path, exit options will arise but there are no plans in this direction at the moment. Its most recent financing of USD 40m in equity and USD 30m in credit facilities took place in April 2019.

Selection of deals with targets in the sector of coating technology:

Announced Date Target Bidder Deal Value USD (m) Advisors
12-Jan-2020* Borchers (USA) Miliken & Company (USA) n/d Buy-side:
LA: Jones Day

Sell-side:
LA: Mayer Brown
FA: Moelis & Company

07-Jane-2020 D-Coat (Germany) OC Oerlikon Corporation
(Switzerland)
n/d Buy-side:
LA: ARQIS
23-Dec-2019 Ellison Surface Technologies
(USA)
Bodycote
(UK)
200 Buy-side:
LA: Credit Suisse

Sell-side:
LA: Lazard

20-Nov-2019** Hi-Tech Coatings International
(Netherlands)
Innovative Chemical Products
(USA)
42.6 Buy-side:
LA: Beiten Burkhardt

Sell-side:
LA: Clearwater International

16-Oct-2019 Jiangsu Teliliang Coating Technology (35.69% stake)
(Netherlands)
Kunshan Kersen Science and Technology
(China)
19.3 Buy-side:
LA: AllBright Law Offices
30-Jun-2019 New Multi Technology
(South Korea)
ESMO Materials Corporation
(South Korea)
6 n/a
16-Apr-2019 BS Coatings
(France)
Mader Group
(France)
33 (2017 turnover) n/a
* USA-based The Jordan Company exited via the transaction.
**Germany-based Heidelberger Druckmaschinen exited via the transaction.

As a global company, HZO started dealing with the coronavirus crisis in December in Asia. It has experienced a shortage of labor as well as raw materials and has seen a slowdown in demand, but its presence in different regions, which are at different stages of the crisis, is also having a balancing effect on the impact, Gold said.

After making sure that its employees could work safely, HZO has started prioritizing diversification and innovation, the executive said. He explained that the objective is to expand the offering beyond its core industry of consumer electronics to the sectors of IoT, industrial, automotive, and medical devices.

Commercial innovation, efficiency increases, and cost reduction are the tasks for the R&D department, Gold added.

Geographical expansion is also on the agenda, Gold said. HZO aims to grow its manufacturing capabilities in Asia and to further strengthen its sales in the US, Asia and the EU countries, he added.

The company, which generates undisclosed revenues, has a global workforce of 4,000, Gold said. He expects fluctuations in the number of the employees in manufacturing to adjust to the changing demand but at present, does not forecast reductions in other departments.

by Laura Larghi in San Francisco with analytics by Melody Ren

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