News from The Valence Group Conference – INEOS Enterprises behaves like a private equity group

The Valence Group Global Chemicals M&A Conference

Wednesday, 14 September 2016 | INEOS Enterprises behaves like a private equity group: CEO | Will Beacham  | ICIS Chemical News

NEW YORK (ICIS)–INEOS Enterprises – which contains lots of the company’s smaller non-core businesses – behaves more like a private equity group within the parent company, its CEO said on Wednesday.

Ashley Reed, director and CEO of INEOS Enterprises, said managers of its individual business units are given targets and remuneration packages akin to the private equity sector and are encouraged to take bold steps to boost profitability as the businesses are prepared for eventual disposal.

INEOS Enterprises contains a diverse range of smaller businesses which have been picked up as part of larger strategic mergers and acquisitions (M&A) deals.

Speaking at The Valence Group M&A conference in New York, Reed said: “INEOS decided it was not a good idea for big commodity segments to also run smaller businesses. So they are carved out and given to Enterprises where they can be focussed and given the attention and capital expenditure they deserve.”

Reed took over as head of INEOS Enterprises in 2011 and in 2012 got agreement from INEOS group CEO Jim Ratcliffe and the board to take a different approach to managing the business more akin to private equity.

He says there are no synergies between the businesses and managers are encouraged to run the units independently. “We are looking for guys who are clever enough to take big steps such as closing a plant, cutting workforce or making small acquisitions. Targets can be to double earnings before interest, tax, depreciation and amortization within three to five years.”

These managers can gain experience which will prepare them well to manage larger INEOS businesses.

Reed said INEOS Enterprises is happy to acquire unwanted businesses: “We will continue to look at commodities and intermediates and we like hardship cases. We’re quite open to taking on businesses in a mess – we enjoy the challenge.”

The group is keen to acquire more in the US but Asia is not an easy place to find targets at the right price. As part of a commodity-focused company the division is not keen to expand into specialties.

He added: “We’re not looking for a strategic fit with what we have but businesses we think we can do something good with. We’re probably looking at 12-15 opportunities for every one that we’re successful with.”

Reed said he finds doing business with private equity sellers more complicated than strategic sellers: “Buying from private equity can be difficult. We find the processes quite long; we have to jump through lots of hurdles. As a strategic company we find one-to-one conversations with strategic sellers are easier to manage.”

During the sale process different routes to market are considered including floatation, auction or one-to-one sale.