The management teams of EU chemical companies have come under fierce criticism from several private equity executives.
The management teams of EU chemical companies have come under fierce criticism from several private equity executives, in a survey commissioned by the UK Chemical Industries Association.
Cogency Chemical Consultants questioned staff from 16 private equity (PE) houses in the chemical sector on their perception of the chemical industry and its attractiveness as an investment opportunity. The general view was that although chemical company management is viewed as highly qualified and technically able, it ’lacks strategic marketing skills, commercial creativity and financial discipline’. The PE executives blame such deficiencies on under-exposure rather than a lack of talent.
According to the Cogency report, ’PE executives recognised the high level of education and intellectual ability of chemical industry management in the key areas of technology, manufacturing and engineering, but identified a significant shortfall in commercial and financial ability’. The report also picked up on concerns from PE investors that the size and complexity of large chemical companies means that ’middle management is more used to taking instruction than taking decisions, with limited exposure to the really tough decisions about future direction and value creation’.
Some of those questioned also suggested that middle and senior management in the chemical industry ’spend more time worrying about short-medium term career opportunities than business-critical issues affecting the company’s medium-long term performance’. PE firms investing large amounts of capital in chemical companies are likely to intervene at an early stage and upgrade management capability, the report states.
The research also highlighted PE confusion over the meaning of terms such as ’specialty’ and commodity chemicals.