Welcome to the PPG Industry's strategic business review update conference call. My name is Nicole, and I will be your conference specialist today. All participants will be in listen only After today's presentation, there will be an opportunity to ask Please note this event is being recorded. I would now like to turn the conference over to John Bruno, Director of Investor Relations. Please go ahead.
Thank you, Nicole, and good morning, everyone. Once again, this is John Bruno, Director of Investor Relations. Thank you for joining us this morning to discuss the completion of the strategic review of PPG's business portfolio. If you recall, In January, we communicated that PPG would complete a strategic review of its business portfolio by the end of the second quarter. Today, we will provide the results of that review as well as to cover a few other substantive topics.
Joining me on the call from PPG are Michael McCary, chairman and chief executive officer, and Vince Morales, Senior Vice President And Chief Financial Officer. Michael will walk through a few slides, which are being presented on this webcast, and currently available on our website, ppg.com. Following Michael's review of the presentation, we will move to the Q and A session. Both the prepared commentary and discussion during this call may contain forward looking statements, reflecting the company's current view of future events, and their potential effect on PPG's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ.
The company is under no obligation to provide subsequent updates to these forward looking statements. This presentation also contains certain non GAAP financial measures. The company has provided the appendix of the presentation materials, which are available on our website, reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures. For additional information, please refer to PBT filings with the SEC. Now let me introduce PBT Chairman and CEO, Michael McGarry.
Thank you, John, and good morning, everyone. We appreciate your participation on today's call. The focus of today's call is to communicate the details and the results from the assessment of our strategic business portfolio review. As John mentioned, we will also take this opportunity to cover the results of 2 additional reviews focused on further improving the operational performance of PTG as a whole. Well as specifically with respect to our US and Canadian architectural coatings business.
These reviews were conducted in addition to the teacher review of our business portfolio as part of our commitment to continuous operational improvement and our focus on shareholder value. Turning to the presentation slides, first on slide 3. I'll remind everyone how the commitments and targets we communicate our 4th quarter earnings call in January 2019. 1st, from a financial perspective, we are reiterating our full year financial targets including 3 flued foreign currency translation impacts. Embedded in these targets is $70,000,000 of cost savings from our previously announced cost savings programs of 2016 2018.
Also, we continue to hold management to a very high standard and will maintain a minimum of 10% EPS growth for a variable long term management compensation. Finally, during 2019, we will recommend to our Board of Directors a per share dividend increase, continuing PPG's long legacy of rewarding our shareholders with dividend increases. 1 of our commitments relates to enhancing our governance structure. And along those lines, we included in our proxy statement, management proposals to eliminate our super majority voting and classified forward requirements. This marks the 3rd and 4th time, respectively, in the last 7 years that we have put these proposals forward for a shareholder vote.
PPG's bylaws require an affirmative vote of 80 percent of PPG's outstanding shares to approve these proposals. To aid in reaching this threshold, We hired a highly regarded proxy solicitation firm to seek additional shareholder votes by both telephone and mail. Despite these extensive efforts, the 2 proposals did not receive sufficient shareholders support this pass. We will review the outcome of this year's vote and potential future steps later this year. Now I'd like to move to the principal part of our call.
It's important to remind everyone that we have a long history of actively managing our portfolio. And as illustrated on slide 4, We have completed a number of acquisitions and divestitures over the past 5 years. In addition, we've taken decisive actions with regard to our cost structure, with a focus on business and regions that are facing sluggish demand and opportunities to reduce administrative costs capturing synergies we commit to for our acquisitions and responding to specific market or business unit conditions. This slide depicts these actions for only the past 5 years. If we wind the time frame, you would see that we have consistently completed value creating acquisitions divested various noncore businesses or product lines regardless of size and acted aggressively on costs.
All these actions over the past several decades are a result of ongoing and well known PPT strategic review process that is action biased. We fully intend to continue reviewing our businesses to ensure each is consistent with our strategy, meeting our expectations, and creating appropriate shareholder value. Moving to Slide 5, which details the 3 recently completed assessments. 2 independent third party financial advisors, Goldman Sachs and Morgan Stanley. We're engaged to perform an independent strategic review of the direction of the Board of Directors.
These advisors are completed separate and independent evaluations of our business portfolio and balance key opportunities with a focus on maximizing shareholder value. In addition to these 2 independent strategic reviews, We concluded a separate engagement by another globally recognized and well regarded consulting firm focused on our US and Canadian architectural coatings business. The primary objective of this engagement was to establish an executed action plan following the customer assortment changes that occurred in mid-twenty 18. To rapidly return this business to its prior earnings level. Finally, consistent with PPG's constant focus on operating excellence, We completed a comprehensive internal review and organizational assessment.
As these 3 separate initiatives progressed, we had updates with our board of directors who are deeply engaged and provide oversight and feedback throughout the process. Clear focus was on creating the most value for our shareholders, and the board's instructions were to hold nothing sacred during the refuse. Now let me discuss the details and results of these assessments. Slide 6 summarizes the scope and key considerations for the strategic reviews conducted by the 2 independent financial advisors. The scope of the reviews included: reviewing various alternatives to separate the architectural and industrial coating businesses, reviewing other portfolio and strategic options, and completing in balance sheet and related cost deployment analysis, focus on value creation opportunities.
Key considerations included net value creation for PPG shareholders, pro form a equity market valuation estimates. Implications on business competitiveness, customers, and ongoing growth potential. Value of synergies or dis synergies and other financial impacts resulting from portfolio adjustments, tax implications, balance sheet effects, liability assignment, and cash deployment considerations. The reviews were very thorough and each financial advisor analyzed various scenarios. Ensuring independence, the advisers utilize external financial estimates as the anchor for their financial analysis, and PPG management wasn't directly involved in their analysis except to answer occasional advisor questions to provide requested companies specific details that are not publicly available and to receive updates as to the timing of the expected completion.
Also, the advisers work completely independently of each other with neither adviser having access to the other adviser's work. Once again, these were thorough and rigorous reviews that took multiple months to complete. Slide 7 is an assessment summary of this work. Despite running 2 parallel and independent analyses, both advisors were consistent in their findings and recommended we stay the course with our current strategy business portfolio as the best opportunity to maintain strategic optionality, minimize risk and maximize shareholder value. The following of the key findings from the financial advisors.
A split of the entire global Architectural Cooley's business or a large component of the Architectural Cooley's business is not likely to result in value uplift for PPG shareholders. A change in the portfolio would likely create potential meaningful dis synergies, incremental costs, and potential tax leakage. Even excluding any potential dis synergies, a separation isn't likely to result in a material shareholder split. A split or separation will reduce overall strategic flexibility and lower potential synergies available in the future acquisition Both advisers recommend that we continue to pursue accretive acquisitions as the primary use of our cash. The assessment took into account PPG's excellent track record of executing accretive acquisitions, including our disciplined process.
The measure of a successful acquisition process is shareholder value creation. In our opinion, the ultimate measure of that return on capital. As illustrated on slides 1819 in the appendix, our return on capital from acquisition averages about two times our weighted cost of capital. Simulatively, PPG's adjusted return on capital has been consistently in the mid to high teen percentages and remains one of highest in our sector. This is measurable proof that we've been successful in deploying capital in a disciplined manner and effectively integrating the over 60 acquisitions that we completed to July's shareholder money, and we're very proud to deliver these returns consistently for our shareholders.
As detailed on Slide 8, after reviewing the assessment of the independent financial advisers, our board concluded that maintaining our current business portfolio supports competitiveness versus all major coatings, peers, daily, all of which have mixed business portfolios. Retained investment flexibility via access to a broader M and A pipeline for future value creation opportunities with neither business being capital constrained. Faintain financial flexibility via diversified earnings streams a robust balance sheet and strong cash flow. Preserve operational and synergy benefits, including supply chain, R and D, operational footprint and top quartile SG And A. The company will continue to focus on innovation and operational excellence as primary levers for organic shareholder value creation.
In addition, we will continue to deploy capital in the disciplined manner which you have come to expect from PPG. Finally, consistent with many generation of PPG leaders, we will continue to review our business portfolio and take appropriate action regarding underperforming product lines, businesses, or regions. Our state to our PPG team all the time. You have to continually earn your way into our portfolio. For now, we'll move to Slide 9, summarize in second initiative, the consulting engagement we conducted to assess the operations and growth investment opportunities for our U.
S. Canadian Architectural Coatings business. The focus of this review was centered on identifying and executing on action plans to fully and rapidly recover our earnings. Following the customer assortment changes we experienced in 2018 and to position the business for success going forward, including implementing leading edge business analysis tools, world class management teams practices, accelerated development of digital and e commerce strategies. Obviously, because much of this review gets to the core of our strategic and commercial direction for this business going forward.
We are not going to discuss the actions or recommendations publicly due to competitive reasons. But what I can say is that we had a full and in-depth review, both internally and with our board of the business growth strategies and operations. The most immediate outcome was the establishment project management office to provide ongoing real time measurements and guidance on the opportunity identified to return this business to the prior earnings level This includes the execution of the restructuring program we announced in mid-twenty 18. However, this is only one of the many elements of the project management office. We're continuing to strategically implement the findings of misengagement, and I'm pleased to report that we're on pace to deliver in the upcoming third quarter In a short period of 12 months, business earnings that are consistent with the pre customer assortment level change.
Lastly, on Slide 10 is our 3rd initiative, which was an internal in-depth assessment of our business and product grade by region. Across a variety of financial measures, including sales growth, profitability and cash flow. As evidenced by both our business and product line divestitures on Page 3. This has been historically been a strong competency for PPG. And at a minimum, we complete annual strategic reviews of our business units.
Major regions, and also of our support functions. In addition, this year, we completed subregion reviews and product segment reviews These line by line reviews were vetted against our current and future economic expectations. To the degree possible, we also roll these reviews. Our recently completed acquisitions with the obvious limitation that we just closed 3 acquisitions within the past 6 months. Yeah.
Some of this detailed review is the Center Decisysys strategic action plan to optimize our operating footprint This includes exiting certain modest business lines or small regional product positions, approaching certain markets with different business models. This also includes rightsizing certain businesses based on the in use demand where our customers are doing the same thing. It also covers various regional elements given today's demand environment. While we are taking certain redundancy actions associated with our recent acquisitions, to begin to realize the targeted synergies. I will stress that at PPG, we don't consider synergies to be just from the acquired company.
Many of our acquisitions have their own best practices, and we will adopt these acquired best practices throughout PPG. As a result of these actions, we expect to take a charge in the second quarter of $185,000,000 to $200,000,000, although we are still working to finalize the final details. This charge excludes certain non cash items such as accelerated depreciation on certain manufacturing footprint adjustments. That we will incur ratably and other associated expenses that will be recognized as incurred based on accounting guidelines. We expect to provide more detail about these items on our 2nd quarter earnings call as they occur over the next several quarters.
We are targeting annual run rate savings from these actions of about $125,000,000 once fully implemented. We expect the majority of these statements to benefit years 2020 2021. We will begin to work on many of these structural actions immediately, It will take multiple quarters to implement those resulting in a more modest impact on 2019. Slide 11 summarizes the conclusions of these 3 separate reviews. We believe that conclusions and actions presented today best position the company for continued growth and create additional shareholder value.
Finally, I'd like to thank our shareholders and employees for their continued feedback and support. This concludes our prepared remarks. Once again, we appreciate your interest in PPT. And then Cole, would you please open the line for questions?
Thank you. You. Our first question comes from Matthew Krueger of Robert W. Baird. Please go ahead.
Hi. Good morning, everyone. How are you doing today?
Good morning, Matthew. So my first question
is, what criteria did the strategic review process prioritize as it relates analyzing the business under a variety of economic scenarios, just given the significant end market diversity across PPG as a company,
So so so, Matthew, as Michael alluded to in in the prepared remarks, the, financial estimates that the, the deposit of our anchor to were external estimates, obvious estimates that would include, certainly the current year as well as the forward looking years. And embedded in those would be, the, the equity investor assumptions on the global economy.
Okay. Got you. That makes sense. And then just a second question. So after the strategic review, have you arrived at any different or more more focused conclusions on your M and A priorities or future business expansion opportunities as it relates growing your footprint, just given some of the commentary around kind of proving less profitable businesses and lines and things like that?
No, Matthew, this is Michael. No, I don't think it changes anything. As you can see in the appendix, we've been very successful on acquisitions, whether it's been in Europe or the US or Latin America. And maybe the acquisition we've done recently come with, facilities in China, which allowed us to continue to grow faster than the market. So I think we're pleased with where we are.
Our next question comes from John Roberts of UBS. Please go ahead.
Thank you. You've got at least for non non paint businesses, silica's eyeglass resins, OLED materials, in airplane wind screens. Did the review evaluate the roles of these frequencies in the portfolio?
Hey, John. This is Michael. The review covered all of PPG. And, what I would tell you about those businesses you referenced, they all have returns above the company average.
Okay. And then I had the impression that you moved up this announcement from what was originally expected
to be the end of the quarter.
Was there a reason for the timing shift
No. We wanted to complete it before the end of the quarter. And once the advisors were done, our internal work had already been done. So the timing was, we didn't feel a reason to hold it, till the end of the quarter.
Our next question comes from Frank Nick of Fermion Research. Please go ahead.
Good morning, gentlemen. And, thanks for the, comprehensive review this morning. Just curious, Have these findings been shared with any shareholders prior to the press release going out this morning?
0.
Thank you. And, it's I was wondering if you might be able to size some of the buckets, or areas where you're expecting the savings program, the $125,000,000 and the charges of $185,000,000 to $200,000,000 that you're taking, on those charges, are some of the expenses associated with strategic review, the consultants, etcetera, buried in that or it's not buried, included in that. How can you help us kind of bucket, what's going on with this latest cost savings program?
Hey, Frank. This is Vince. All the restructuring charges, relate to curtailments of businesses or business activities. There are no, charges in that in those buckets related to work done for this assessment. The 3 primary buckets we have for restructuring, we're going to continue to optimize our manufacturing footprint, first and foremost.
We're also looking at, again, some small, product lines or some, places around the world. We have very small positions where we haven't, been proven to to grow levels consistent with our strategies. And we're obviously looking at the economic backdrop today and making some decisions around how that looks going forward and starting to evaluate, the sizes of certain, regions or businesses. So those would be all the work we're doing from a restructuring perspective. As Michael alluded to in the prepared remarks.
We're not done with that analysis yet. We will be completed by the end of the second quarter. And in our July conference call, we can provide some more granular details.
Our next question comes from Kevin McCarthy of VRP. Please go ahead.
Michael, of the various strategic alternatives that the board considered, did any of them receive meaningful, support other than, the course of action that you've outlined this morning. Just wondering whether the board, is unanimous in its approach or, or whether there was you know, any any, alternative opinions put forth.
On the board with unanimous, I think when you go through the, detail that the advisor was put forward plus the internal review. The conclusions were pretty obvious. So there was a 0 opinions that we should do anything different besides what we're announcing today.
Okay. And then it sounds like some pruning of smaller product lines will be in the cards going forward. Can you address what criteria you'll look at in determining whether to keep or separate, business lines or or product lines with subpar profitability.
Yes. So the first one, of course, is a cash flow return. So that would be 1. Second is our future outlook on the ability to grow. So if we're looking at a region that we've had 2 or 3 years in a row of, what I would call, minimal to no profitability And if we anticipate that the economic conditions in those, regions or subregions would continue, then we're looking to, trim support in that area.
Our next question comes from Michael Sison of KeyBanc. Please go ahead.
Hey, guys. Michael, I think you mentioned that, your goal for EPS growth is 10% He may be, walk us through the, you know, the variables that get to there longer term. And and if that goal is a, all straight up 10% goal or is it ex currency
and such?
Well, as we said in our prepared remarks, it's ex currency. And that the goal for us is to continue to, you know, drive a growth in the fit various businesses, you know, capital deployment, the growth from the acquisitions, cost savings are all part of that metric. And Mike, the other thing we're honestly working on is recapturing our margins So that price raw mixture that has been unfavorable the past couple of years. We're working to get that back in our favor in, in 2019.
Okay. Great. And then in terms of, on your reiterated for this year, any sort of update near term how trends are going in terms of, sales growth and, and, and, but that's as far here in 2Q.
We can confirm our 2 quarter guidance. Yes. We gave guidance with a range in Q2. The quarter is shaping up as we had envisioned when we gave the guidance about, 5 weeks ago. You know, that guidance had a little bit of a range due to some of the, you know, geopolitical and economic uncertainty out there.
But we're, we're comfortable where we stand today. We did have, when we gave that guidance in, in mid April, we did have visibility for 3 or 4 weeks in most of our businesses, and you take care of us that visibility. So again, we're comfortable right now with, with the guidance we put forth in Q2.
Our next question comes from David Begleiter of Deutsche Bank. Please go ahead.
Thank you. Good morning.
Michael, Vince, of the $125,000,000 of cost savings, are any going to come from U. S. And Canada architectural?
Nothing materiality. We we have a separate program that Michael talked about in the opening remarks. Really focused on that, recovery of that business as profitability. There are certainly some smaller items in all of our businesses that we're tackling But the majority of the restructuring comes from, other regions or other businesses. And David, just to add to that, this is a reminder, when we announced the settlement change, we said that we were going to take in plants data.
We have closed 4 plants, since that period of time. So all those actions have been taken. That's why we're confident that our earnings in 3Q will, be at or better than the prior, earnings before the assortment change.
Very good. And just on the charge, can we, for this current program, how much is cash versus non cash?
$200,000,000, $185,000,000 to $200,000,000 is primarily cash. Again, as we said in the prepared remarks, there are non cash charges that will incur ratably, as we, accelerate depreciation on certain assets. Again, we'll give some of that information out as we hit the hit the 2 queued call. There are also certain cash charges beyond 185 to 200 that will, will expense as we incur per the accounting guidelines. Again, we'll size that in 2Q earnings call, but that's not a significant amount.
Our next question comes from Christopher Parkinson of Credit Suisse. Please go ahead.
Thanks. So as far as the realignment is concerned, to one extent, do you believe there are the kind of incremental opportunities for the, let's say, the future portfolio, whether that be cross selling, you know, powdered liquid into industrial customers. Any other opportunities even something on the services fronts for Aero And Or Industrial, just can we get an update there? Thank you.
Well, do cross selling all the time. I think one of the reasons why, the advisors continue to recommend the acquisitions as well as asset we have internally recommended is that, if you look at, like a protective marine business, when we go into a new market, with architectural footprint, we're able to increase the size of our protective marine business. We're able to do some additional cross selling with industrial light industrial products. So those are two examples of where that happens. We always look for opportunities in our automotive space to sell other products in our, in our industrial.
Obviously, we just bought, our Whitford with the low friction coating, they have, we have a very good automotive team that will be trying to sell more of those coatings into the automotive and heavy duty equipment market. So, cross selling opportunities abound in this coating space. And, Chris, if I could just add, the other opportunities we have is really, pushing R and D across the portfolio. And there are customer demands in different coatings verticals. That we try to meet each year.
We find either, that same year or another point in time those customer demands may pop up somewhere else in our portfolio in another region. In another business, we're able to read, you know, very quickly redeploy our R and D across, again, our entire portfolio in a similar vein of cross selling certainly at the technology scale.
Great. And you hit on this a little, but can you just further break down the $185,000,000 to $200,000,000 2Q charge the non cash items. And just can you help us reconcile that versus the $125,000,000? Just is there any chance that savings will be materially higher you know, when it's all said and done. Thank you.
Thanks. Thanks, Chris. Now, again, we're still working through the final details of the charge. Again, our, our target is $125,000,000 of savings. The cash outlay is going to be between $185,000,000 $200,000,000.
Again, plus some other costs that will be recognized as incurred. That that's the information we have, you know, today. And again, we'll provide some more granular details on that in the July earnings call.
Our next question comes from P. J. Juvekar of Citi.
Good morning, Peter. Good morning.
Did this architectural study evaluate your channel strategy? What I mean by that is, would you deemphasize it per to the channel, like the dealer network or maybe open more stores, or is there any finding there that looked at your channel strategy and how to grow organic organically?
Yes. They looked very carefully at all phases, whether it's company owned stores, dealers or the, big boxes. And, they were very comfortable with our current, strategy and they validated that, obviously, they have a few, tweaks that they suggested that we consider. But by and large, it was, consistent with what we're doing.
And then secondly, eliminating some product lines, are you moving up the price ladder? Meaning, would your pricemix move up in the subsequent quarters?
That would be a good assumption, P. J. I think though when you think about finding, some of these, these are going to be small products small countries. So, the answer is yes, but it's not gonna be something you would probably find, quickly. FPGA, then it's again, again, normal process here as we look at profitability by business by region, There's always a tail prop, there's a tail of products and customers and regions where you try to work on that tail year in and year out.
You should assume these are the lower profit, these are lower profit portions of the tail. And we're trying to enact on those. Some of those put in place in the past as potential growth opportunities that didn't materialize. We're trying to make sure We react based on current environment.
Our next question comes from Arun Viswanathan of RBC Capital Markets.
Wondering about the volume side, your business, you know, volumes have been weak and obviously there's been macro pressures, but Did the review include any, new initiatives, you know, from a company standpoint, that, that, that would drive for volume growth. Is there anything that you could do internally to, to accelerate and potentially recover some of that volume?
Yeah. I'd say 2 things, Arun. 1, you know, our our review, our internal review, as well as getting the IVF estimates certain assumptions in them. We, we definitely, are focused on our cost savings programs around you know, our, our views of the economy in certain regions, etcetera. With respect to the current environment, it is certainly a bit choppy out there.
Again, that was assumed in our Q2 guidance and our full year guidance. So there's no change there. We do have a significant amount of work underway U. S. Architectural business around the, the consultant feedback to try to increase our volume growth there.
And all of our businesses, frankly, significant actions around volume growth, even in a, an amiable volume environment. So there's nothing out of this study other than the architectural work that's specific to that. But again, we have significant organic R and D efforts underway that have been underway for quite some time, and we're executing against those.
And on the the cash deployment side, you know, did it also include, you know, maybe some consideration of
larger scale M and A.
It seems like that's been, something that you would have considered before. Where do you stand on, whether that would be you know, additive to shareholder value? Thanks.
Yes. So Arun, they did make specific recommendations. Obviously, I don't think this is the environment which to go through which ones they did do, but, let's just say they didn't enough to anybody that we were not, fully aware of. Yeah. And, again, I think what we've been talking about for the last year is it's a very active M and A space right now.
Michael mentioned, we closed 3 deals in the last 6 months. There's been another 3 deals done really in the last 6 weeks. Those some of those have been large deals, several $1,000,000,000. We continue to look at our pipeline. We continue to vet opportunities.
We still feel that's a very good use of shareholder cash at the right price. We will remain have remained disciplined. But the pipeline is active now. If we don't have an opportunity to, to close on certain deals, and we'll look at share repurchase as a lever to return cash to our shareholders.
Our next question comes from Andrew Catches of Barclays. Please go ahead.
Hi, good morning, everyone. Just a couple or 2 questions on balance sheet. The first leverage has certainly picked up over the last year and a half. Is there a debt metric or perhaps a ratings target? That you'd like to maintain to the cycle.
And then I think as a follow-up, you you clearly highlight preserving financial flexibility for opportunities Is it possible to frame up maybe how much balance sheet capacity you would have for such opportunities or said differently, I guess, are A- credit ratings sacred to the business?
Andrew, we've been pretty consistent in saying we wanted the investment maintain our investment credit rating. We also said we would stretch for the, you know, a really good acquisition, which we did, try year and a half ago. So those, parameters remain in place. If it's a really big one, we're happy to to stretch, But right now, investment grade is where we're comfortable being.
Our next question comes from Don Carson of Susquehanna Financial Group. Please go ahead.
Yes, a question on your consultant, work on the U. S. And Canadian architectural. What recommendations do they have in terms of of your future investment in the business. Is this something where you're just going to not invest capital or you're going to be more aggressive in store openings or branding some may seem like they'd be pushing the PPG brands.
Can you just talk about your willingness to invest in that business?
We're gonna continue to invest, to grow that business. But I always remind people we run a global architectural business. So when we look at store openings, we look at where we're gonna have the bank, not the best bang for the buck. And, obviously, Mexico has been a a high return environment for us. UK and France have been high return environment.
So we're gonna continue to invest selectively in the stores in the US where it makes the most amount of sense.
And then as a follow-up, how big a factor was the tax leakage from, you know, separating out architectural and industrial?
Yes, Paul, this is Vince. Again, it depends on your view of what the value of the business is. We don't, we're not going to get out specific numbers on the call here, but in different scenarios, tax leakage comes into effect on any company's portfolio. So again, it wasn't the biggest decision driver. The biggest decision driver was, as earmarked on, one of the slides with the dissynergies.
And that was a bigger, much bigger factor in terms of the analysis.
Our next question comes from John McNulty of BMO. Please go ahead.
Question. So with regard to the returns analysis that you did on the, on the M and A, the results coming in at 2 times, your cost of capital is impressive. Does it make you think you should be even more aggressive with M and A going forward considering how high the returns have been on the acquisitions you've done?
Well, John, that was a point that was debated by the advisors. You know, again, we're gonna be diligent and, make sure we're disciplined. And when we look at all these things, sometimes we do have better returns because the raw material synergies, pop a little higher or the sales synergy pop a little higher, but, you know, I think our approach has been consistent. But I think you raised a ballast point and the advisors also raised a ballast point. Make no mistake.
I mean, and all those decisions are with the backdrop that it's a shareholder money. So I'd rather have a little higher batting average, and, continue to return value to our shareholders, but by the same token, it's a very valid question.
Fair enough. And then just a follow-up. On the bucket that you have on page, I think it's 17 where it shows the technology, geographies, scale and adjacent buckets in terms of the types of acquisitions you've done, are there any that stand out, any of those buckets expand out where the returns were noticeably either higher or lower than kind of what you were talking to in the total corporate average?
No. Not not really done. It's more on the property, John, more of the ability for us to to and struck us obviously a good, acquisition price and then obviously the synergy level. Those are typically the key parameters that drive the returns.
Our next question comes from Jeff Zekauskas of JP Morgan. Please go ahead.
Thanks very much.
Will the Goldman and Morgan Stanley studies be disclosed?
Sorry. Yeah. No.
Okay.
I just think you're saying a lot of proprietary information that's, you know, nonpublic from, from a company perspective.
Okay. And second, in the assessment of the value of breaking the company into two pieces, an industrial piece and an architectural piece. Was there also an examination of the strategic possibilities of the 2 smaller companies, that is if there were merger possibilities or sale possibilities or divestiture possibilities that were weighed against the dis synergies that would come from splitting the company into two pieces, or was it simply a simpler analysis of looking at the big company versus 2 smaller companies and their valuation in the public markets with raw material dis synergies. How complex was data
off this? Yes. The advisers did a thorough analysis more of the former of what you talked about. Again, there's there's multiple permutations. Everybody can through.
But they, they try to do the, perspective from our shareholder. So if the shareholder has a remainco, And if SpinCo, what that means, again, there's, there's certainly a lot of assumptions that go into these analyses. That I do believe the advisors tried to do is they're, they're perspective based on the shareholder value creation, the ultimate shareholder value creation.
Our next question comes from Steve Byrne of Bank of America. Please go ahead.
Yes, thank you. Did your strategic review lead you down the path of reassessing your current structure of your segments, for example, is 2 optimal? Would what about 3 or why are 5 businesses in 1 and 4 in the other. Could you have pulled architectural out? Anything along those lines, also assessed in the in the review?
Hi, Steve. It's Vince. Our our reporting structure was not part of the, the deliberations here. Something we control as a company. We have that reporting structure as it really separates distribution type businesses versus B2B type businesses.
We're comfortable with that reporting structure as it exists, but this analysis was not, inclusive of that.
And a question on your Home Depot business. Have you increased your commercial investment in that in that relationship? And are you seeing any traction as of now in that investment?
Well, all I would tell you is that we've been very happy with our relationship in Home Depot. We've room with the various DIY segments better than our underlying customers I won't get into a specific customer, but we've been very pleased with our growth in that area.
Our next question comes from Dimitri Silverstein of Buckingham Research. Please go ahead.
Yes. Good morning. I just wanted to follow-up on, on, Arun's question from earlier. Was there anything in this review process that sort of identified, the, the source of the the difficulty that you have of growing the business organically, even in line with your with your markets, let alone, exceeding the market growth rate. And if so, what are some of the steps that you can be taking in the near and the midterm to speed up your organic growth performance?
Dmitry, the primary focus of this was the performance of the company and then the separation of it. Clearly, they had some commentary that they provided. But again, as we've mentioned on our earlier remarks, it gets into the strategic part of how we're going to run the company. So I think we'll pass on getting into further detail on that.
Our next question comes from Jim Sheehan of SunTrust.
The $125,000,000 in cost savings. How will you apportion that by segment performance coatings versus industrial coatings?
Again, Jim, we'll give some more details on our 2Q call. As Michael alluded to in the opening remarks, the material that will occur in 2020 2021, we will have a sliver of that that, we'll recognize the savings of in 2020, 2019. But again, all those details are forthcoming.
Our next question comes from Bob Koort of Goldman Sachs. Please go ahead.
Thank you. Good morning. On Slide 17, where you show your, your returns on capital, is that, left to right time scale? And then Secondly, the bars where you've been able to get a lot more, in the post completion returns, have there any commonalities, that have driven that superior returns from what you first estimated?
No. They're, they're not by time. They're by, just different acquisitions. And,
you know,
a lot of the returns have to do with the price we paid, obviously. So you can see like acquisition, too, it was a very, what I would say, a very accretive price and some of the other ones were more competitive. So, but they are a variety of of end markets and variety of regions and a variety of products. Hey, Bob. Every acquisition is different in the criteria.
Every acquisition is different in terms of the synergy capability opportunity. Obviously, there's execution, that we do on each one of these. So so it's really hard to, overall, have a rule of thumb. And there are certain averages that we follow and, seem to come true over time, but each one is a is a different entity.
And then I'm curious if you'd if
the advisers gave you some ideas, maybe we could do around the edges. And you guys fairly active in your productivity goals. So is there anything uncovered that you didn't expect that is new to you? That maybe the external you gave you some new perspective?
Let me start and I'll let Michael finish here, but No, I think in the architectural study, again, I think we, we, it's always good to get an outside perspective and a refresh on on different things. Management tools, management cases, different analysis tools. And and so that, respective was, very helpful. In the, separation review. Again, the advisors, bounced up a lot of different ideas.
That were informative. As Michael alluded to, they all ran to the same, result at the end, but it certainly gave us a different thing to think about as we go through individual strategic reviews of our businesses or regions. But, but, those would be the 2 live pinpoint. Yeah. The one thing I would point to, Bob, you know, one of the items that they were able to track in I would say better real time than we were doing it before was pricing.
And, that the tools that they brought, I would say, you know, accelerated our viewpoint on pricing by, week or 2, you know, so we might know at mid month or end of month, they would know it more on a on a real time basis. And so, they complimented what we were doing, but they certainly I thought they could accelerate the insight.
This concludes our question and answer session. I would like to turn the conference back over to John Bruno for any closing remarks.
Thank you, Nicole. I'd like to thank everyone for their time and interest in DDG. If you have any further questions, please contact our Investor Relations department. This concludes our call.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.