Adhesion Matters
Adhesion Matters pulls back the curtain on the remarkable world of adhesives—the invisible technologies quietly revolutionizing everything from smartphones and EVs to Hollywood effects and wind turbines. We guide listeners on a deep-entangled journey through innovation, sustainability, and the surprising human stories behind the products that hold our modern life together.
Adhesion Matters isn’t just about chemistry—it’s a storytelling lens on how sticky stuff shapes our world. Every episode reveals that adhesives do more than bind—they enable durability, safety, and innovation across industries. Tune in if you’re curious about the overlooked tech that really holds things together.
Adhesion Matters
Industry Shakeups: How M&A is Reshaping Adhesives
You might not think about what holds our world together—but that invisible hero is adhesives. In this insightful episode, Adhesion Matters dives into how mergers and acquisitions have quietly transformed this foundational—and surprisingly dynamic—industry over the past fifty years.
What You’ll Discover:
- An Invisible Powerhouse in Plain Sight
Learn why adhesives aren’t just sticky—they’re a multi-billion-dollar, fast-growing market—projected to rise from around $85 billion in 2025 to nearly $115 billion by 2030, at a healthy 6% CAGR. - Driving Forces Behind Growth
From lightweighting in vehicles and planes, to automated packaging in the e-commerce boom, to modular construction—adhesives are increasingly replacing screws, rivets, and other fasteners. - Why M&A Matters
Despite its size, the adhesives sector remains remarkably fragmented—only about 40% is held by major players; the other 60% lies with hundreds of small and midsize manufacturers. That fragmentation makes it ripe for consolidation. - What Makes Targets Irresistible
Acquirers are chasing niche specialists with proprietary tech, strong positions in growing markets (like EVs, aerospace, medical), sustainable formulations, or geographic reach in high-growth regions. - High-Stakes Deals & Smart Strategies
Hear how deals like Henkel’s Loctite acquisition in the 1990s, Huntsman’s transformation through specialty polyurethanes and epoxies, Dow’s long-running joint venture with Corning, and DuPont’s recent reshaping through divestiture and focused acquisitions have reshaped the industry. - Why It All Matters to You
M&A isn’t just financial jiggery-pokery—these moves unlock R&D capabilities, scale operational efficiencies, accelerate global presence, and bring us closer to advanced, sustainable, and high-performance adhesive solutions.
Bottom Line:
Adhesives may be invisible, but M&A is actively crafting their future. If you're interested in how innovation, strategy, and market forces converge behind the bond, this episode is your backstage pass to the dealmaking driving our emerging world.
Welcome to the Deep Dive. Today, we're pulling back the curtain on an industry that quite literally holds our modern world together. But it's one you rarely, if ever, really think about. adhesives. It's this huge, rapidly growing sector that's been, well, dramatically reshaped by mergers and acquisitions M&A over the last, what, five decades.
Elena Bondwell:Yeah, about that. It's been a long process.
Lucas Adheron:So our mission today is to sort of unpack its hidden strategic importance, show you how M&A has driven its evolution and, you know, explore what that means for its future.
Elena Bondwell:It's fascinating, isn't it? Something so ubiquitous, almost invisible, is actually a multibillion dollar powerhouse. I mean, to give you a sense of the scale, this market is projected to grow from, let's see, an estimated $85.38 billion this year. 85
Lucas Adheron:billion, wow.
Elena Bondwell:To nearly $115 billion by 2030. That's with a compound annual growth rate, or CAGR, of 6%. 6%. Yeah, which is a pretty consistent expansion. It really underscores just how foundational and, frankly, adaptable this invisible industry is to almost every major global trend.
Lucas Adheron:A 6% CAGR for an industry like this is pretty remarkable. And when you look at the key dry for this growth, it becomes clear why it's so robust. We're talking about the lightweighting revolution in vehicles, making cars and planes lighter. the explosion of automated e-commerce packaging, and the increasing push towards modular construction. This isn't just about sticking things together anymore. It's about enabling these future-forward technologies and efficiencies.
Elena Bondwell:That's precisely it. Adhesives have moved far beyond just sticky tape. They are now high-performance bonding solutions, actively displacing traditional mechanical fasteners like screws or rivets in many cases. This shift is less about simple assembly and more about advanced material So
Lucas Adheron:as we unpack these growth catalysts, you'll find just how interwoven adhesives are with our daily lives. Take the e-commerce boom, for example. The sheer volume of boxes moving through fulfillment centers worldwide. It demands a level of reliability and speed from packaging adhesives.
Elena Bondwell:Absolutely. Labels, tapes, carton sealing.
Lucas Adheron:Exactly. Things that would have been unimaginable just a decade ago. And then there's the rapid rise of modular and prefabricated construction, especially prominent in the Asia-Pacific region.
Elena Bondwell:Yeah, that relies heavily on advanced adhesives for speed and, importantly, structural integrity. And we really can't overlook the sustainability imperative either. There's this intense industry-wide push for eco-friendly recyclable formulations.
Lucas Adheron:That seems like a big challenge.
Elena Bondwell:It is. This isn't just a nice-to-have. It's driving fundamental innovation. It raises a really important question how can we bond things strongly today while still allowing for easy recycling or disassembly at the end of a product's life? It's a complex challenge with massive implications.
Lucas Adheron:I'm struck by that point on sustainability. Plus, you've got ongoing technological innovation in areas like, what, waterborne and hot melt technologies.
Elena Bondwell:That's right. They're constantly expanding what's possible, pushing the boundaries of what adhesives can actually do.
Lucas Adheron:So when we break down the market segmentation, where does the biggest demand lie?
Elena Bondwell:Well, Packaging leads. It's the dominant end user, holding about 43% of the adhesives and sealants market in 2024. Globally, it's even higher, maybe around 52%. Makes
Lucas Adheron:sense, given what you said about e-commerce.
Elena Bondwell:Totally. But the high growth sectors are really interesting, too. Building and construction, that's projected to grow at a 6.5% CAGR through 2030. Okay. And healthcare, which is actually the fastest growing segment overall, lots of potential there.
Lucas Adheron:So from a chemistry perspective, what are we looking at? It must be a Pretty diverse.
Elena Bondwell:Oh, incredibly diverse. You have polyurethane, which is prized for its versatility and strength. Silicone for high temp resistance and flexibility.
Lucas Adheron:And like super glue.
Elena Bondwell:Exactly. Cyanoacrylate, that's the super glue known for its fast setting, high strength properties. Then you have water-based technologies, which currently account for 42% of revenue, largely because they're more eco-friendly. Right. And reactive systems are the fastest growing through 2030 with an 8.2% CAGR.
Lucas Adheron:Reactive systems? What's special about those?
Elena Bondwell:Well, unlike glues that just dry, reactive systems undergo a chemical change. They cure to form these incredibly strong and durable bonds, perfect for high performance needs where durability is absolutely paramount.
Lucas Adheron:Got it. So what does this all mean for you, the listener? Adhesives are these critical inputs enabling major industrial trends. Think about lightweighting in automotive and aerospace, those hyper-efficient automated packaging lines we talked about, and the speed and precision of modular construction.
Elena Bondwell:And it's why the sector is often characterized as highly recession resistant. Its utility is just so pervasive across almost every industry.
Lucas Adheron:It really does hold the modern world together, often without us even realizing it.
Elena Bondwell:Which brings us neatly to why M&A is such a, well, such a driving force in this industry. Despite its colossal size and foundational importance, the adhesives market is remarkably fragmented.
Lucas Adheron:Fragmented? How so?
Elena Bondwell:Well, a handful of major players only hold about 40% of the global market value.
Lucas Adheron:40% at least.
Elena Bondwell:A massive 60% dispersed among hundreds, literally hundreds, of small and medium-sized enterprises, many with revenues under $100 million. So
Lucas Adheron:what you're saying is this creates a really diverse pool of attractive acquisition candidates for the bigger companies to, well... scoop up.
Elena Bondwell:It absolutely does. And one of the core reasons for this consolidation often boils down to raw material cost pressure. Raw materials make up a huge chunk of the cost of goods sold, something like 53 to 63 percent.
Lucas Adheron:Wow, that's high.
Elena Bondwell:It is. And volatile prices for those materials disproportionately impact the smaller players. It makes them vulnerable and, frankly, attractive targets for larger companies who are seeking economies of scale in procurement. This isn't just about getting bigger. it's about gaining leverage in purchasing.
Lucas Adheron:It's a critical observation. And then there's globalization, right?
Elena Bondwell:Exactly. As major customers like the big automotive OEMs consolidate globally, adhesive manufacturers have to expand their own global footprint to serve them effectively.
Lucas Adheron:And M&A is the fastest way to do that.
Elena Bondwell:By far. You can't just organically build that kind of presence overnight. Acquisition gives you immediate scale and market access.
Lucas Adheron:Makes sense. What about regulations? Do they play a part?
Elena Bondwell:Oh, definitely. Environmental regulations play a significant role. Strict rules like those on VOC emissions or the EU construction products regulation, they force innovation and compliance. So companies that already have advanced compliant and sustainable technologies, think water based or UV cured adhesives, they become highly desirable acquisition targets.
Lucas Adheron:So the acquirer gets that tech quickly.
Elena Bondwell:Precisely. It allows them to rapidly meet evolving demands without having to reinvent the wheel internally.
Lucas Adheron:Yeah, of course, there's the ever-increasing demand for high-performance solutions.
Elena Bondwell:Right. The shift towards specialized applications, lightweighting, automated packaging, advanced medical devices, it drives M&A towards those niche players who have proprietary formulations.
Lucas Adheron:So it's not just about adding volume.
Elena Bondwell:No, it helps acquirers reposition themselves as specialty materials providers with unique, hard-to-replicate capabilities.
Lucas Adheron:Okay, let's talk financials. This sector is seen as high-value and recession-resistant, you said.
Elena Bondwell:Yeah.
Lucas Adheron:How does that translate to the M&A deals?
Elena Bondwell:Well, it translates into consistency. consistently high M&A valuation multiples.
Lucas Adheron:Meaning they pay a lot for these companies.
Elena Bondwell:Relatively speaking, yes. For example, the Arkema and Ashland deal was valued at over 20 times trailing 12 months EBITDA.
Lucas Adheron:20 times. Can you quickly explain EBITDA again?
Elena Bondwell:Sure. It's earnings before interest, taxes, depreciation, and amortization. It's basically a common way to measure a company's operational profitability, how much cash it generates before accounting for non-operational costs in certain accounting charges.
Lucas Adheron:Okay, so 20x EBITDA is high, but they expect it to come down.
Elena Bondwell:Yes, that multiple was expected to reduce significantly, down to maybe 8.7x by 2026, once they achieve the planned synergies. And generally, the average chemical M&A multiple is approaching maybe 9.0x enterprise value to EBITDA through 2025. Still pretty healthy.
Lucas Adheron:And those high multiples are justified by what you called highly obtainable operating synergies.
Elena Bondwell:That's the key, especially in raw material purchasing because of that high cost percentage, but also in sales and marketing and manufacturing optimization.
Lucas Adheron:So the raw material savings are a huge driver.
Elena Bondwell:Massive. This isn't just financial jargon. It means these acquisitions are designed to unlock real, tangible efficiency gains, making them incredibly attractive investments.
Lucas Adheron:What's also interesting here is the role of private equity.
Elena Bondwell:Yes. PE firms are quite active. They account for about 25% of chemical industry transactions overall.
Lucas Adheron:Why are they so interested?
Elena Bondwell:They're drawn by the fragmentation, which offers consolidation opportunities, the stable cash flows many of these businesses generate, and relatively low capital expenditure requirements compared to other industries.
Lucas Adheron:So they often pursue buy and build strategy.
Elena Bondwell:Yes, exactly. They buy a platform company and then add on smaller acquisitions. It further accelerates market consolidation and offers viable exit routes for smaller, often family-owned businesses.
Lucas Adheron:Okay, so we've talked about why this industry is so ripe for M&A. Now let's look at who is actually leading this charge. How are these corporate titans strategically using acquisitions to redefine their empires? Let's start with Henkel. You call them a master of the acquisition game.
Elena Bondwell:They really are a prime example of an acquisition-led powerhouse. They've systematically combined their own organic growth with really strategic purchases over decades.
Lucas Adheron:The Loctite deal in 97 seems pivotal.
Elena Bondwell:Oh, absolutely a game changer for Henkel. They paid over a billion dollars just for a 65% stake.
Lucas Adheron:And Loctite was special because? It
Elena Bondwell:was incredibly profitable. Famous for that, sells by the drop and not by the pound model, a really efficient business. And crucially, they held proprietary tech, anaerobic adhesives and cyanoacrylate, you know, the super glue tech.
Lucas Adheron:So it gave Henkel a flagship brand and high margin technology.
Elena Bondwell:Exactly. It catapulted them forward in the adhesive space.
Lucas Adheron:And they didn't stop there?
Elena Bondwell:No. In 2008, they bought National Starch for $2.7 billion. That broadened Henkel's portfolio significantly. And more recently. Just last year, 2023, the acquisition of Critica Infrastructure. It shows their ongoing focus on targeted bolt-ons, this time for sterilized maintenance, repair, and operations MRO solutions specifically for critical infrastructure. It's a very consistent strategy.
Lucas Adheron:Okay, next up, Huntsman. Their journey sounds like a transformation.
Elena Bondwell:It really has been. They moved from more basic commodity chemicals towards differentiated specialty products, and M&A was absolutely key to that. Early on, they made some big moves to diversify, acquiring Texaco Chemical in 94, ICI's Industrial Chemicals Division in 99. These brought in key adhesive building blocks like polyurethanes, laying the groundwork.
Lucas Adheron:And then they created a specific division for this.
Elena Bondwell:Yes. In 2003, they established their Advanced Materials Division. That came through acquiring the Vantico Group, which really focused them on epoxy, acrylic and polyurethane systems, including the well-known Eroldite brand. That was a clear signal of moving into higher value applications.
Lucas Adheron:Right. Eroldite. I know that name.
Elena Bondwell:Exactly. And their recent bolt-ons in 2020, CBC Thermoset Specialties for $300 million and Gabriel Performance Products for $250 million. These just What did those
Lucas Adheron:deals achieve?
Elena Bondwell:Okay, moving on to Dow. Their M&A
Lucas Adheron:strategy sounds more like... Continuous portfolio sculpting.
Elena Bondwell:That's a good way to put it. They've engaged in massive mergers, but also very strategic divestitures over the years. Think about the Dow Corning joint venture. It started way back in 1943 as a 50-50 JV with Corning Glassworks.
Lucas Adheron:Wow. 1943. Yeah.
Elena Bondwell:A long history. Dow finally acquired the remaining 50% in 2016 for $4.8 billion, securing full control of that crucial silicone technology. That's a long game they played.
Lucas Adheron:Decades. And then the huge Dow DuPont merger.
Elena Bondwell:Right. In 2017, that was a monumental monumental corporate reorganization. It ultimately led to a more focused material science company for Dow after the spinoff in 2019. The goal was really about creating a leaner, more agile enterprise focused on its core strengths.
Lucas Adheron:And they're still refining. You mentioned a recent divestiture.
Elena Bondwell:Yes, very recent 2024. They sold their flexible packaging, laminating adhesives business to Arnama for $150 million. This was explicitly driven by what they called a best owner mindset, a strategic decision to focus on core, high-value, sustainable segments where they see better growth or synergy.
Lucas Adheron:But they didn't sell everything in that area.
Elena Bondwell:No, and this is crucial. Dow retained its water-based laminating and acrylic adhesives. It shows a very nuanced, strategic approach. They're optimizing their portfolio, not just making broad cuts.
Lucas Adheron:Interesting. Okay, finally, DuPont, also known for big portfolio changes.
Elena Bondwell:Yes, significant portfolio rationalization and also targeted acquisitions. Their mobility and materials divestiture in 2022 was huge, selling the majority of that 11 billion.
Lucas Adheron:Why such a big move?
Elena Bondwell:It was all about unlocking shareholder value and really sharpening their focus on core, high growth, high margin businesses where they felt they had the strongest competitive advantages and future potential.
Lucas Adheron:But like Dow, they kept certain parts.
Elena Bondwell:Exactly. DuPont retained specific parts of that business, notably certain advanced solutions and performance resins, specifically their auto adhesives and fluids.
Lucas Adheron:Ah, so keeping a foot in high-value automotive, probably thinking about EVs.
Elena Bondwell:That seems very likely. It shows a focused interest there. And just this year, 2024, they acquired Donatel Plastics.
Lucas Adheron:What's that?
Elena Bondwell:It's a medical device contract manufacturer. This move demonstrates a clear pivot, or at least an increased focus, towards high growth and markets like healthcare.
Lucas Adheron:Where specialized adhesives are critical.
Elena Bondwell:Absolutely critical for new product development and medical devices.
Lucas Adheron:These case studies really paint to picture. M&A isn't just about getting bigger.
Elena Bondwell:No, it's about becoming more specialized, more efficient, and more strategically aligned with where the market is heading. It's about shaping the entire industry landscape, really.
Lucas Adheron:So what are the overall effects, the ripples, of all this consolidation across the industry? You mentioned earlier that despite all this M&A activity, the market remains pretty fragmented at the lower end.
Elena Bondwell:That's right. That 60% held by hundreds of smaller players is still a defining characteristic. It's not like it's it's become an oligopoly. Not yet anyway.
Lucas Adheron:Okay. But M&A does accelerate innovation.
Elena Bondwell:Oh, clearly. Especially in those key areas. Sustainable formulations, high performance applications like medical grade or EV components, and advanced curing technologies. Larger players gain R&D capabilities and critical know-how from the firms they acquire. Acquisitions effectively become a shortcut to accessing cutting edge technology.
Lucas Adheron:And it drives operational excellence, you said. Those synergies.
Elena Bondwell:Yes. Acquisitions can generate substantial Exactly. But also leverage sales and marketing operations and optimize manufacturing footprints. Those savings are absolutely massive and can immediately impact the bottom line.
Lucas Adheron:M&A also offers a quick way to expand globally.
Elena Bondwell:Definitely. It provides a rapid pathway for major players to expand their reach, particularly into high growth regions like Asia Pacific. It bypasses the slower, often more capital intensive process of building organically from scratch. It's a fast track to market share.
Lucas Adheron:And financially, the impact is pretty direct.
Elena Bondwell:Very direct. M&A is a lever for enhanced financial performance and shareholder value. It can accelerate earnings growth and generate significant free cash flow. Often there are expectations of immediate EP meaning
Lucas Adheron:the deal is expected to boost earnings per share right away
Elena Bondwell:correct making the acquiring company appear more profitable for its shareholders almost instantly assuming the deal is structured and executed well
Lucas Adheron:so this leads us to the critical question what's next where is this m&a train headed
Elena Bondwell:well the first point is that persistent 60 fragmentation that ensures a continuous pipeline of attractive acquisition candidates for years to come the consolidation isn't finished
Lucas Adheron:so what makes these remaining targets so attractive? What are acquirers looking for?
Elena Bondwell:Several things. Niche specialization and a technological edge are key. That could mean proprietary formulations or expertise in advanced curing technologies like UV LED curing or these sophisticated dual cure systems.
Lucas Adheron:Expertise in specific chemistries, too.
Elena Bondwell:Yes. High performance chemistries for extreme conditions, epoxies, silicones, cyanoacrylates or materials with critical properties like biocompatibility, which is crucial for medical applications.
Lucas Adheron:And being in the right markets.
Elena Bondwell:Absolutely. A strong position in high growth end markets is vital. Medical devices, EV electronics advanced packaging, aerospace, maybe critical infrastructure repair. Geographic presence is also a factor. Having a strong regional market share in high-growth areas like Asia Pacific or key North American industrial hubs is a big plus.
Lucas Adheron:And sustainability must be playing a bigger role now.
Elena Bondwell:Increasingly important, yes. A focus on sustainable, eco-friendly, or recyclable solutions definitely makes a target more attractive. ESG alignment is becoming table stakes.
Lucas Adheron:And the financials.
Elena Bondwell:Financially healthy companies, of course. Stable cash flows, relatively low capital expenditure needs that makes them appealing, especially as we said to private equity. And finally, the ownership structure often matters. Family owned businesses or perhaps founder led unfunded companies might be actively looking for scale or planning exit strategies, making them opportune targets.
Lucas Adheron:OK, so can you give us some examples? Who fits this kind of profile?
Elena Bondwell:Well, consider a company like Master Bond Inc. in the USA. They're currently an unfunded company specializing in a diverse range of high performance So a perfect bolt-on
Lucas Adheron:for someone needing that specific expertise.
Elena Bondwell:Exactly. Then there's Jowett Corporation, originally German, but with a big U.S. presence, too. They're a global industrial adhesive supplier. They have manufacturing sites across continents, Germany, USA, Switzerland, Malaysia. and importantly, a new R&D and manufacturing center in China, plus a broad product range, including green adhesives.
Lucas Adheron:And they're family-owned.
Elena Bondwell:Yes, family-owned. That combination, global footprint, sustainable offerings, family ownership, could make them an attractive platform acquisition for a larger player or even PE.
Lucas Adheron:Interesting. One more.
Elena Bondwell:Let's look at DELO Industrial Adhesives, also from Germany, also family-owned, but they invest a really significant amount, about 15% of their turnover, back into R&D.
Lucas Adheron:15% is a lot.
Elena Bondwell:It is. They're a leader in UV curing and advanced dual curing systems. And they provide turnkey solutions, not just the adhesive, but the dispensing and curing equipment too.
Lucas Adheron:So a full system provider.
Elena Bondwell:Right. They're critical suppliers in semiconductor sensors, medical equipment, EV manufacturing, working with huge global OEMs like Mercedes-Benz, Samsung, Bosch. They really epitomize that highly specialized innovation-driven target.
Lucas Adheron:Okay. So to sort of wrap up our deep dive today, the adhesive industry, though often overlooked, is clearly a truly dynamic, high growth sector.
Elena Bondwell:Absolutely. And M&A has been the primary engine of its transformation, really driven by that unique market fragmentation and the relentless demand for ever more specialized solutions.
Lucas Adheron:And we've seen how leading players have used M&A not just for pure scale, but really for strategic repositioning, getting access to cutting edge innovation and achieving significant operational efficiencies.
Elena Bondwell:That's right. And the ongoing consolidation will undoubtedly continue to shape this vital industry in profound ways. It's a space to watch.
Lucas Adheron:Definitely. As our world demands lighter, more connected, and crucially more sustainable products, the quiet science of adhesives just becomes even more critical. Think about it. The next breakthrough in electric vehicles or medical devices or even the simple efficiency of your next online package might literally be stuck on the innovative power of this industry and its ongoing consolidation. So here's a thought to leave you with. What seemingly invisible industry do you think is quietly shaping our future right now.
