Geosynthetica’s Elizabeth Peggs sits down with Solmax Inc. President Jean-Louis Vangeluwe to discuss the company’s bold move in acquiring GSE Environmental. The move brings together two of the most well-known international brands in geosynthetics manufacturing and engineering. Watch this interview to hear directly from Solmax about when interest in the acquisition developed, the challenges and expectations in combining two major companies, and what benefits they see for the geosynthetics industry and for customers in combining the strengths of Solmax and GSE Environmental.
VANGELUWE ON ACQUIRING GSE ENVIRONMENTAL
While the geosynthetics industry has wondered about the potential for this acquisition for months, Vangeluwe notes that the initial idea sparked within Solmax a couple years ago and was related to on-going pressures in the market that were acting upon all producers. The geosynthetics industry has long had cycles of innovation followed by commoditization as the global civil engineering field standardizes its use of these materials and more manufacturers enter the market. In boom times, companies often find themselves pressured on cost to gain or hold market share, while in tougher economic cycles they may struggle to control costs.
With geomembranes, these pressures present an enormous challenge, given the sensitive nature of so many containment applications (e.g., landfill construction, hazardous waste capping, mine tailings and processing pits, etc.).
From that perspective, the move is one of consolidation, which Vangeluwe notes was going to happen.
“The matter was, ‘Who could do it and when?’ Vangeluwe says. “The geomembrane business—everybody was looking for a cost-leadership type strategy from 2000 up to 2012. Why? The market was growing very fast. … In 2012, the mining investment stopped and just after that energy stopped investing.”
Companies sought to be leaner and more cost-effective. Companies started to weaken.
“That’s exactly the right timing for consolidation,” Vangeluwe says.
In early 2017, Solmax acquired some of the distressed assets of the former Brawler Industries. This gave the company a chance to establish Solmax USA out of the production center it acquired in Houston, which is also the city in which GSE Environmental has long had its global headquarters.
REVERSING A TREND IN GEOSYNTHETICS
Beyond consolidation, the acquisition is ultimately one of talent, resources, skills, and production capacity. It is also one that the company sees as a way to beneficially impact—to change the direction—of the geosynthetics industry.
“We actually want to transform the geo industry,” Vangeluwe says. “We do not believe in cost-leadership strategy for the future. This is the same for any industry in the world: tvs, smartphones, whatever. There comes a moment when you need to innovate either on process or product. … We didn’t want to do it alone. We wanted to do it with another company that really brings a critical size so we can actually have an impact on the industry.”
The task of blending the two companies is a large one but not one that Solmax sees as a unique challenge. It’s simply growth.
“We have a clear vision of what we want to do with this acquisition,” Vangeluwe says. “It’s an acquisition in fact, but it’s a merge, just because of the different size of the two companies. We have to merge the two companies, we have to merge the two cultures, we have to merge the people.”
Vangeluwe also sees the size of the merger as unrelated to making it a success. Company size, he says, is not too important in geomembranes.
“What is complex in our business is the international factor,” he says.
GSE Environmental and Solmax are both very international, so they share the same challenges in that respect and they both have found solutions over the years to keep succeeding.
“We are going to have a great time sharing information and knowledge,” Vangeluwe says.
And with the combined companies having a manufacturing presence in North and South America, Europe, Asia, and the Middle East, the company will now be able to play with the focus of each facility to optimize efficiencies in production and in the use of raw materials; further enhance delivery times and engineering services to project sites; and create value for all involved. This includes for other producers.
Again, Vangeluwe notes that Solmax does not see itself as being competitive in all of its materials for all world regions. He emphasizes that the acquisition is not for cost leadership. He sees that as an errant path for manufacturing.
GLOBAL MARKET IMPACT
In the short term, prices shouldn’t really move. There are many producers, Vangeluwe says.
In the middle- and long-term, Solmax sees acquiring GSE Environmental as helping it focus on what it does best; and, by being the size it is, some other companies will not force commoditization in all areas of geomembranes (e.g., in the high-temperature geomembrane arena in which GSE and Solmax have both advanced materials). Competitors may focus on their own unique capabilities. They will innovate their product lines in ways that differentiate them from Solmax, so the marketplace will get a full range of materials with increasing quality. This will create stability and growth for producers and give customers options that are the most efficient and appropriate for their sites.
Commodity applications will still exist, but the industry will still be able to protect the core quality that it needs to service critical containment applications in infrastructure.
“If we fail, we fail together,” Vangeluwe says. “If we win, we win together.”
Learn more about GSE Environmental’s product lines, patents, and engineering resources at www.gseworld.com.
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