2014 has maintained the momentum in deal volumes seen in 2013, with around 40 transactions compared to 35 in 2013. Expansion into strategically significant markets and investment in platforms and supply chains continue to characterise many deals.

Positive trading news from a number of the major producers reflects increasing demand for carbon fibre. New aircraft applications, compressed natural gas tanks, the shale gas industry and demand for wind turbines are supporting growth. Toray, which recently won an extension to its carbon fiber supply contract for the Boeing 787 Dreamliner to supply the main wings of the 777X, announced that it expects global demand for carbon fibre to rise by 17% year-on-year in 2014, to 48,000 tonnes, and by a further 20% in 2015 to 58,000 tonnes.

Automotive sector in focus

Over the last few years, the major producers have used strategic acquisitions to ensure they can benefit from this rising demand. In 2014, the deals that have made the headlines have been by firms using acquisitions to position themselves for the longer-term increased use of carbon fiber in automotive applications as the major OEMs start to incorporate carbon fiber materials for mass production. For example, Toyota Motor has adopted Toray’s carbon fiber material for its new Mirai fuel cell vehicle; Toray’s rapid press molding technology means carbon fiber reinforced thermoplastic can be adopted for a structural component in a mass production vehicle for the first time.

Japan’s Mitsubishi Rayon, which has used a series of acquisitions to strengthen its carbon fibre supply chain, acquired a majority stake in Wethje, the German manufacturer of carbon fiber reinforced plastics (CFRP) parts for automobile applications in July. The acquisition gives it access to CFRP technology and strengthens its materials business for automobile applications in Europe.

Away from the automotive sector, US-based Tex Tech Industries acquired UK-based Universal Carbon Fibres Ltd, which manufactures high-performance yarns and fabrics. The specialty chemicals group ALTANA has acquired technologies and customer-specific know-how in the field of polypropylene wax emulsions from Royal DSM and URT, one of the UK’s leading composite engineering solutions providers, has secured a strategic investment from Kamkorp through its core operating company, Frazer-Nash Research Limited.

Private equity active

In the US, HGGC-backed Citadel Plastics made its eighth plastics-related acquisition since 2007 in October, buying The Composites Group from Highlander Partners. The deal improves Citadel’s positioning in engineered composites and should allow it to gain customers in current and new end markets.

In the UK, NorthEdge Capital invested in composite door manufacturer, Solidor. The investment will be used to expand Solidor’s senior management team, continue investing in operations, capacity and IT, whilst also providing the support for a buy-and-build strategy.

Outlook

M&A market conditions remain very favourable for 2015. Strategic acquirers continue to target technology and capacity in established and emerging markets such as automotive. This is presenting small to mid-sized manufacturers with attractive opportunities to scale and broaden their end markets.