It was in every newspaper: in June 2010, the speciality chemistry company Cognis was sold to BASF Group. Cognis employs more than 2,000 people in Germany - and as many as 5,500 around the world - and recently recorded around EUR 2.6 billion in annual sales. The company was financed for almost ten years by private equity firms and is a success story for private equity in Germany.
Cognis has almost 60 subsidiaries in the standard and speciality chemistry sectors and its customers come from industries such as food, cosmetics, textile and plastics. The company was founded in 1999 as a wholly owned subsidiary of Henkel, the detergent and adhesive group from Düsseldorf, which wanted to outsource its chemical production segment. Just one year later, Henkel decided to sell Cognis to focus entirely on its core activities. The private equity firms Permira and Goldman Sachs Capital Partners became the new owners.
Private equity invests with the aim of successfully restructuring the company
The strategy of the new owners was to fundamentally restructure the company’s organisation and strengthen its market position with new acquisitions. At the end – this was the idea – Cognis would be transformed into a speciality chemistry company with a strong global presence reaching right into local markets. A chemical company that is close to its customers and beats the competition with its power of innovation.
In the following years, the owners started changing the ‘quite unpopular’ group division with little focus into a leading global company in the green chemistry sector. Unprofitable business areas were sold, new core areas and regional units in growth markets acquired and both were successfully integrated. Step by step, a company with a robust business model and a portfolio focusing on proximity to customers in growth markets emerged.
In spring 2003, Cognis acquired the British company Laporte Performance Chemicals. The idea was to improve its market position in Great Britain. In 2004, the company took first steps towards improving its organisational structure. ‘The five strategic business units assumed the responsibility for all market-relevant business processes including research and technology, production, parts of procurement and supply chain management,’ reports Dr Antonio Trius, CEO of Cognis. ‘We wanted to implement our market and customer orientation even more consistently.’ As part of this drive, the company moved its head office again to Monheim in North Rhine-Westphalia.
The first acquisition was followed by others: in 2006, Cognis took over the British polymer specialist Cosmetic Rheologies and the Norwegian supplier to the food sector Napro Pharma AS. By taking over Napro Pharma, Cognis strengthened its position as leading global provider of natural ingredients for food supplements.
Positive company development from the start of the investment
In summer 2006, the sale or IPO of Cognis became an issue. But after thorough deliberations, Permira and Goldman Sachs Capital Partners consciously decided to continue with their investment. Cognis had already shown excellent development up that point and was well on its way to becoming a strong global player in the green-chemistry sector.
The company remained in the hands of the private equity firms for another four years. During this period, the management board was expanded and subsidiaries in India and Malaysia established. But the company did not just carry out acquisitions: in 2008, Cognis disposed of business segments with weak margins in the three-digit million range. No sooner was the sale of the segments completed, Cognis started feeling the pinch of the economic crisis. Not only did the company escape relatively unscathed thanks to its product portfolio, but it was also one of the few chemistry companies in the world that closed financial year 2009 with rising earnings figures. Cognis’ customer proximity, a robust product portfolio and strong market position made it less dependent on economic cycles than companies in the petrochemical sector (production of chemical products from natural gas and oil).
Financial year 2010 is the most successful by far in the history of the company. This is just one of the reasons why the company became attractive to other investors. In June, it was sold to BASF for EUR
3.1 billion. BASF is using the takeover to strengthen its position in the sector for speciality chemistry products that are used in detergents, cosmetics and body care products.