Groupe Solmax acquires its biggest competitor in an award-winning deal
On May 3, 2018, an acquisition made by Groupe Solmax was singled out for recognition at the M&A Club Awards Gala, which celebrates excellence in mergers and acquisitions in Québec. The award was for a transaction that took place at the end of 2017 by la Caisse’s Private Equity, Québec team, through which Groupe Solmax acquired GSE Environmental, a U.S.-based competitor.
How it all came about
In today’s world, where consolidation activity is commonplace, it is not unusual for one company to acquire another. What sets this transaction apart is that Groupe Solmax acquired the largest player in its industry – and not the other way around, as was originally anticipated.
“In 2016, we caught wind that GSE Environmental was eyeing the acquisition of Groupe Solmax,” explained Solmax President Jean-Louis Vangeluwe. “But we weren’t looking to sell. So we put an acquisition proposal forward instead, which meant we had to find partners to finance the deal.”
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The Québec-based company specializes in manufacturing polyethylene geomembranes used in containment systems for domestic, hazardous and industrial waste landfill sites, retention ponds, fracking and heap leaching pads. Operating out of Houston, Texas, GSE Environmental also manufacturers geosynthetic products. The merger of the two resulted in a new global industry leader.
“We had come to a point where we had to be innovative, not just with our products but with our business processes as well,” said Mr. Vangeluwe. “This merger let us do just that by giving us the critical mass we needed to have a real impact on the industry.”
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La Caisse recognized the potential that the acquisition represented for this Québec leader in a highly fragmented market. The deal was a bold one: the Québec company, with three plants and a hundred employees, would be buying the world leader, with seven plants and a around 600 employees. But ambitious did not necessarily mean unrealistic, as the analysis of the investment team concluded. La Caisse therefore decided to join in on the transaction, alongside Fonds de solidarité FTQ, a Groupe Solmax partner since 1996.
“This investment is perfectly in line with our Québec strategy,” indicated Christian Dubé, la Caisse’s Executive Vice-President, Québec. “Through it, we are helping a local company grow and creating a new Québec-based world leader in the promising environmental services sector. This is very important to us as we are committed to building global leaders right here. What’s more, Groupe Solmax operates in a field where innovation is vital. That’s exactly the kind of company we are looking to invest in.”
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M&A transactions of this scope obviously require careful planning and execution. Collaboration between the various stakeholders involved in the process – investors, legal counsel, financial advisors and both companies – is what made it possible to hammer out an award-worthy transaction. Yet another winner in the deal: the Québec economy. This homegrown business has the potential to become big enough to work more efficiently with multinationals looking for suppliers with the manufacturing and service capacity to serve an international market.