European Industrial Consolidation: What Scale Must Deliver

A company can have an excellent product and still struggle to support international growth.

The difficulty may appear after a successful trial. A customer wants the product at another plant, in another country, with the same technical support. The distributor needs stock and training. Production needs a reliable forecast. The commercial team needs to know who can make a decision when the application changes.

These are operating requirements. They also help determine whether a company can compete against a supplier with a wider network and more resources.

Recent developments in China and the coatings industry make this a useful moment to examine European industrial consolidation. The question is what additional scale would allow a business to do, and whether a change of ownership is needed to achieve it.

Economic weakness and industrial capability can coexist

China's record goods trade surplus in the first ten months of 2026 has reopened discussion about its role in global markets. October's strong growth in both imports and exports adds context to a debate often dominated by property-sector problems and weak consumption.

Those difficulties remain relevant. The IMF's 2026 Article IV assessment describes strong exports alongside weak domestic demand and structural imbalances. An increase in import values does not, on its own, establish a recovery in household spending.

For an industrial company, however, a macroeconomic slowdown is a poor substitute for competitor analysis. A competitor may strengthen its technology, distribution or overseas support while its home economy faces serious difficulties.

The useful assessment is specific: which companies are gaining capability in the applications and countries we serve?

Local presence changes the competitive comparison

A supplier exporting from China and a Chinese-owned business with local support present different propositions to a customer.

BYD's German aftersales announcement in September 2026 illustrates the investment involved. The company reported around 220 authorised workshops and described parts infrastructure and training plans.

This does not establish that every Chinese manufacturer offers comparable service. It demonstrates an approach to building confidence through support near the customer.

In industrial materials, the equivalent may be an application laboratory, a trained distributor, local stock or a technical team able to visit a production site. Not every market requires a wholly owned subsidiary. Every market does require a credible answer to the customer's operational needs.

For European businesses, this can make a traditional advantage less exclusive. Technical competence still matters, but the company has to fund its delivery across the markets it chooses to serve.

Start with the capability gap

Before asking whether to acquire another business, I would identify the constraints on the commercial plan.

The answer may be more focused investment by the existing company. It may be a strong partner. It may also reveal a gap that cannot be closed credibly without a larger organisation.

The distinction matters because buying revenue does not necessarily remove the constraint.

Different parts of chemicals need different kinds of scale

In basic chemicals, capital intensity, plant utilisation, energy and feedstocks can make production economics central to the decision.

In formulated materials, the value may lie in application knowledge, technologies, customer approvals or the ability to serve a specialised market. A smaller acquisition may add something commercially important without transforming the group's overall size.

COIM's acquisition of Neoflex offers a historical example. It acquired control in 2021 and full ownership in 2023. The companies described the combination in terms of polyurethane adhesives, integration with COIM's polyesters and international commercial and technical projects.

That illustrates a possible rationale: combining production knowledge with downstream applications and market access. It is not evidence that every acquisition in adhesives will produce the same result.

My view is that these capability questions will make stronger combinations relevant to parts of the chemical industry. That can involve Italian companies acquiring abroad, specialist businesses joining a larger group, or established multinationals combining complementary operations.

What AkzoNobel–Axalta demonstrates

On 6 November 2026, AkzoNobel and Axalta announced conditional European Commission approval for their proposed merger, including a remedy involving AkzoNobel's European vehicle refinish business. The combined company will be called Axanzo, a name announced on 15 October. Completion remained subject to outstanding approvals, with closing expected in early 2027.

The announcement shows that the search for greater reach and investment capacity also concerns companies already operating globally. It does not demonstrate that the merger has delivered those benefits, or that competition from China is its sole cause.

For other businesses, the useful question is which capabilities could genuinely improve through combination, rather than whether becoming larger is desirable in itself.

An alliance needs commitments it can enforce

Formal cooperation can preserve ownership independence while making a shared facility or market presence possible. Industrial districts and complementary suppliers may have capabilities worth connecting.

A credible alliance needs more than a joint intention. Partners have to agree on funding, responsibilities, priorities and what happens when circumstances change.

Who approves the annual technical budget? How is scarce support time allocated? Who manages a customer problem involving more than one partner? What happens if a member leaves?

These decisions are especially important when the investment takes time to generate revenue. Cooperation that depends on every participant agreeing to each operational decision can become fragile.

When ownership becomes part of the answer

A merger or acquisition can create the authority to allocate resources across businesses. It can also introduce debt, disruption, integration costs and slower decisions.

I would compare the alternatives against the same requirement:

These are management choices, not a ranking. A specialist with a defensible position may be better served by focus than by expansion into markets it cannot support.

Integration is a commercial responsibility too

After a transaction, I would want to know how the combined offer will work for customers.

Are sales teams approaching the same accounts with compatible proposals? Can technical teams support the broader product range? Are production and quality requirements aligned? Does local decision-making still work?

The acquired business may be valuable precisely because of its application knowledge and customer relationships. An integration plan that damages those strengths can undermine the reason for buying it.

A practical review should therefore include:

• Customer retention and repeat business.
• Product qualifications actually completed.
• Delivery reliability and resolution of technical problems.
• Use of shared facilities and support resources.
• The recurring cost and capital needed to sustain the new organisation.

Combined revenue is relevant. It does not answer these questions.

Independence and competitiveness

European industrial diversity is a source of expertise and entrepreneurship. Preserving those strengths does not require preserving every existing ownership structure.

Equally, concentration is not automatically progress. The purpose should be a business more capable of serving its customers and funding its development.

China's export performance gives this debate urgency. The response needs to come from a clear assessment of the technologies, networks and resources that matter in each sector.

For me, the question is whether an independent company, a formal alliance or a combined group has the most credible plan to provide them.

Where in your industry is independence still a competitive advantage, and where is it becoming a constraint?

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