The acquisition of Airgas by Air Liquide was yet another step in the long history of consolidation in the packaged gas industry. Over the last 10 years, Airgas led the hunt buying 128 businesses with an average of $12 million in annual revenues. The other majors were likewise very active, completing more than 75 distributor acquisitions during this same period.
This trend of consolidation both at the large and small end of the spectrum has been driven by the need for the market leaders to capture margin throughout the supply chain, enhance cash flow and secure long-term customer relationships. The result…we now have four major producer/distributors in the US packaged gas market — down from six in 1990 — and the number of independent distributors has shrunk from several thousand to less than 900.
While the statistics are not as readily available, small and mid-size distributors seem to have been underrepresented as buyers of assets up for sale, leaving the industrial gas industry with a shrinking number of nimble, entrepreneurial, and strong independent distributors. One of the reasons that the big keep getting bigger is that sellers often perceive mid-sized companies as lacking the capital necessary to acquire competitors of similar or equal size. Partnering with private equity investors can help reverse this trend by enabling best-in-class independent distributors to build scale both on the production and distribution side, increase the strategic significance of their businesses and ultimately grow the value of their enterprises.
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