Since PPG announced their divestiture from the architectural coatings segment my devices and LinkedIn profile have been abuzz with messages from employees and retailers of the company, all wanting answers to the same (sort of) questions!
Those impacted by THE divestiture are right to be nervous as it’s likely the new owners will bring significant change; because PPG did not divest themselves of their architectural coatings division because it was so profitable!
Most concerned seem employees in the mass merchant segment, the company's Glidden brand is available at both Home Depot and Walmart. Employees I spoke with were all expecting reductions in force, hardly unusual after any acquisition.
Though that segment’s lack of profitability raises fears further.
Also concerned for their jobs are employees of the more than 700 PPG paint stores nationwide, all I messaged with sharing they expect seismic changes once new owners take over, unless like PPG American Industrial Partners (AIP) plans to run the stores as a write-off? Because sources with knowledge of the transaction tell me that of the 700 stores AIP just acquired, only 300 were profitable.
Considering what we’ve witnessed private equity do to profitable stores just this year, employees at unprofitable ones are right to be concerned. Though for some, help may be on the way.
Because also on edge are the 600 independent PPG paint retailers nationwide, unsure even what name their stores will bear once the deal is consummated.
And while dealers fret that uncertainty several I’ve spoken with are seeking opportunity in the melee, interviewing PPG store managers and sales reps uncertain about their futures.
A sound strategy employed recently with success during the aftermath of Kelly-Moore.
Appointed chief executive officer of this new corporation currently unnamed was Jaime Irick, a veteran of PPG’s architectural coatings division who since 2019 has served as Senior Vice President of that division with responsibility the United States and Canada.
In righting the ship Irick faces serious challenges the nature of which could explain the more than 50% price drop AIP paid during the due diligence process. Among those challenges will be to turn a profit on relationships with mass merchants Walmart and Home Depot, something PPG was never able to accomplish but new ownership will insist on.
In his company-owned stores division again Irick must profit where PPG could not, which won’t get any easier after he loses their brand. Because he won’t be able to call them PPG Paint for too much long.
And with too few stores to compete nationally and brands which place fourth in most markets behind Sherwin-Williams, Benjamin Moore and other regional powerhouses, Irick is going to have trouble finding a niche for his newly acquired brands.
Though having a name should help.
Also helping Irick will be independent retailers, likely rebranded to Pittsburgh Paint once the deal closes in January. Newco’s only profitable segment from jump, retailers allow margins not possible selling paint to the boxes and without all the overhead of company-owned stores.
THE secret to #Dan’s success!
But higher profit margins and lower overhead is not all Irick will find in the independent channel, our industry’s only growing market segment. He’ll also find hundreds of entrepreneurs ready to move on from decades of abandonment and likely willing to engage in a conversation about growth with Irick were he to express a well-developed vision for that channel.
And should Newco tire of retailing and seek to exit that segment, because private equity does what private equity does, in dealers Irick might find a ready market for those stores.
At-least the good ones.
Still months away from the transaction’s closing time will tell what impact the divestiture ultimately has on independent PPG dealers, but I like their chances under Newco than I did at PPG.
Though not everyone agrees!
But to PPG independents represented mere rounding error while at Newco they’re a division likely more than 20% of Irick’s business. A division already profitable, where investments in growth are likely to require smaller cash outlays and shorter on ramps as compared to those made in mass merchants or their own stores.
A change in circumstance for PPG dealers more than worth the inconvenience.
