Henkel: not coming unstuck
New chief executive must decide whether to change the group’s shape
Bayer’s Werner Baumann was not the only new chief executive to take up his post at the start of this month. On the same day Mr Baumann moved into the top office in Leverkusen, Hans van Bylen was tucking his feet under the desk at Henkel’s Düsseldorf headquarters. He too is a company veteran, and is also likely to be contemplating acquisitions to help drive growth — though almost certainly not on the scale of Bayer’s $62bn Monsanto bid.
Under Kasper Rorsted, Mr Van Bylen’s predecessor, Henkel steadily increased sales and improved margins but did not fundamentally change its shape. Its mix of revenues — from adhesives to personal care and household products — is broadly the same now as it was in 2008.
This time last year, Henkel missed out on an acquisition that would have changed this: a portfolio of P&G’s haircare brands that went instead to Coty for $12.5bn. That deal might also have helped Henkel achieve its sales target of €20bn by 2016, a goal that has since been effectively abandoned. The company now prefers to talk about achieving a compound-average rate of earnings growth instead.
It has not given up on acquisitions, and is reportedly bidding on haircare assets again. The target is Vogue International, owner of OGX shampoos and FX styling products. Vogue represents a useful test case for Mr Van Bylen. One of his main strategic challenges will be to find uses for Henkel’s growing financial firepower — by 2018, Liberum thinks it will have net cash of almost €4.5bn. Personal care products offset the inherent cyclicality of industrial glues. But they tend to be keenly fought over. The P&G brands fetched about twice their annual sales. Even Vogue, whose $2.5bn revenues are much smaller, is attracting bids from large consumer products groups. There is possibly less competition for household products, such as washing powders and detergents.
Henkel has been a disciplined acquirer in the past. And if Mr Van Bylen needed a warning about the dangers of overpaying or lurching in an unexpected strategic direction, he needs only look at the investor criticism directed at Mr Baumann.