1. Start-Up Strategy
Industrial gas companies are generally founded by an idea to offer better service to a group of customers than that provided by the existing industry.
Clear examples of this are the development of technology by the two largest companies:
Air Liquide and Linde, which allowed air gases, primarily oxygen, to be produced by cryogenic distillation, thus reducing production costs.
This displaced the earlier chemical methods of oxygen production and offered larger volumes to the industry.
Other major companies, like BOC, recognised the value of the disruptive technology and seized the opportunity.
Initially, these companies had a territorial reach expanding only to regions where their home nation had political influence.
Other companies, often product users, developed their own technology to improve their raw material costs and to supply their customers.
2. Development Strategies
The next major step was the concept of onsite supply, developed by the new company, Air Products.
This used the potential revenues from long-term contracts to raise money to build the plant.
The Bankers were mainly interested in the client’s survivability and not the industrial gas supplier. With this development plants became larger and by-products, such as argon, were then available to develop new processes.
There was a gradual expansion of the business and new joiners, like Union Carbide who acquired the US parts of Linde after the First World War and eventually spun off as Praxair, tended to stay in a certain territory.
The real challenge was expanding the business. Developing a bulk liquid business was a natural extension for companies with onsite ASU’s because the liquid could be delivered to a reasonable radius by tanker and a lot of wholesaling and liquid swaps reduced the risk of an unloaded plant.
3. Expansion Strategies
So how did the current majors expand successfully?
Mainly by the careful acquisition of weaker competitors and, where necessary disposing of any inappropriate activities of the acquisition.
The key take over activities were:
- 1978 BOC acquire Airco Inc to give them a presence in North America
- 1996 Praxair of Liquid Carbonic to gain their CO2 business in North America
- 1999 Praxair and BOC fail to merge and BOC is sold to Air Liquide and Air Products. The acquisition fails because of anti-trust issues.
- 2000 Linde acquires AGA to increase its presence in northern Europe
- 2001 Goldman Sachs and Allianz acquire an overextended Messer Griesheim
- 2005 Air Liquide acquires part of Messer Griesheim and the rest is acquired by the Messer Family
- 2006 Linde acquires most of BOC to become the biggest gas company
- 2012 Air Products fails to acquire Airgas
- 2016 Air Liquide acquires Airgas to re-gain market leader position
Airgas grows over the whole period by careful acquisition of small cylinder companies and the plant divestitures forced by the Air Liquide takeover of part of Messer Griesheim.
In the period shown the companies divested various divisions to each other exiting particular lines of business like industrial cylinders and homecare.
At the same time they expanded gently or fiercely into other geographies and industry sectors and often had problems as a result.
The companies that suffered most were those which failed to understand when their expansion from their niche was not working or was using too much of corporate assets.