Global Finance talks to Patrick Destang, CEO of multinational roofing materials firm Ondura, about making acquisitions during Covid-19.
Global Finance: The Ondura Group recently brought together three leading roofing materials companies—France’s Onduline, Germany’s Alwitra and Poland’s CB—under a single umbrella. How did the firm manage that during a pandemic?
Patrick Destang: We made the first acquisition [Alwitra] right before Covid-19. The second [CB] was expected to close in April 2020, but in March Covid-19 hit and everything stopped. We wondered what would happen. Would demand collapse? Would cash be tight? But we soon realized that as people were locked down, they were also investing in their homes. In the US, DIY stores like Home Depot were considered essential businesses and remained open.
We saw some positive tailwinds. I was about to fly to Poland to resume discussions, but now the seller was asking for more, feeling the economic climate was more positive for them. I had to convince [Ondura’s] shareholders that it was a good idea to pay more for the company–i.e., that it would create massive synergies. We came to an agreement on price in the summer of 2020. Since then, EBITDA increased by 40%–so it’s been a successful acquisition.
GF: You have 2,000 employees in 13 countries, but you’re a very decentralized company.
Destang: We have only 20-25 people here in our Paris headquarters. Building-materials usage differs from country to country—competition, price points, nature of distribution, etc., so you need agile local managers who don’t have to depend on the CEO to make decisions.
GF: Has the financing of ongoing operations gotten more challenging during Covid-19?
Destang: Since January, the number one issue in the minds of CEOs is the increased cost of raw materials and the delays in the supply chain. The response is often to stock more raw materials, but you must be careful that you’re not squeezed into buying raw materials at the wrong time. The price of some plastics doubled, but those prices can just as well go down.
GF: And shipping costs?
Destang: Some opportunistic suppliers declared force majeure, which generated a massive price increase. That had an impact on container prices, too. The price of a $2,500 container increased to as high as $10,000.
GF: When you acquire foreign companies, is it difficult to integrate them into the group?
Destang: The companies we acquire are typically family owned. Sometimes there’s a leader, who may be looking to retire. So, you must spend a lot of time doing due diligence about the cultural fit—is he going to stay or does he want to leave, who will be the leader once he leaves, and do we all get along—not so much on business views, but on core human principles. On the notion of trust, for instance, or on keeping one’s word.
GF: Where do you see growth moving forward?
Destang: We believe we can grow 5% or 6% per year internally over the next five years based on the initiatives that have been put in place—including exploring new geographies. But I don’t think that’s enough. We need to find companies with whom there will be synergies with the rest of the group, in terms of channel distribution, cross-selling and bringing on additional capabilities and skills. We could buy a company in the €5 million [$5.86 million] to €50 million size range involved in safety tools and equipment to protect the roofers from falling, for instance. Any new company must understand the concept of Ondura, which is to protect buildings from water and wind.