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CLEVELAND — Plastics companies are commanding top dollar in merger and acquisition deals, according to industry analysts.

``There's been greater activity in the chemical industry in general and plastics industry in particular than in other manufacturing industries,'' said Bill Ridenour, vice president of TransAction Group of Cleveland.

TransAction Group acts as financial adviser on acquisitions, joint ventures, divestitures and strategic alliances for middle-market companies. Part of the group's staff specializes in the plastics industry.

``There's more money floating around than I have personally ever seen in my 16 years in this business, and that goes back to the `merger mania' in the mid-80s,'' he said.

``There has been a healthy economy and strong stock market for a number of years. People have made an awful lot of money and are looking for new investments.''

That outlook is shared by Samuel Smith III, president of Wentworth Capital, headquartered in Portsmouth, N.H. The company specializes in financing equipment purchases and acquisition deals in the plastics industry.

``It seems as though there's been a lot more interest by institutional and private investors in plastics companies,'' Smith said. ``The supply of capital to the industry right now is at an all-time high. There's a lot of money on the wayside waiting to be invested.''

According to a market study issued by TransAction Group, a number of factors are contributing to investor demand for plastics companies:

The plastics industry is outperforming the gross domestic product.

Investors have more money with which to buy midsized companies.

Acquiring additional companies is both an offensive and defensive tactic for the plastics industry as consolidation reduces the number of players.

Many of the early plastics entrepreneurs are nearing retirement age, meaning more of their enterprises are coming up for sale.

Ridenour's firm tracked the sale of 88 middle-market companies in northeast Ohio.

Of that total, 22 sales represented chemical, paint and plastics operations, with the plastics companies including both processors and compounders.

Smith confirmed that he was seeing the same kind of trends nationally.

``Investors are watching where is the automobile going,'' he said. ``They see the increased amount of plastics used.''

Plastics also is a ``stable'' industry, attracting investors hoping to add steady growth firms to their portfolios as a hedge against high-growth and often more-volatile investments, Smith said.

When plastics companies do sell, they go for more money than the average for manufacturers, Ridenour said.

``Prices have been as high as we've ever seen them,'' he said. ``They are at least a multiple higher than the average price paid for manufacturing companies generally.

``And that's bringing sellers out of the woodwork.''

Wentworth's Smith said a standard method of pricing an acquisition target is to multiply earnings by six.

A company that sells for three to five times earnings is considered a steal, he said.

But plastics is becoming a sellers' market, Smith noted.

``Some move into the sevens and even into the eights [as multiples of earnings] for the right buyers,'' he said.

``The industry is in a very healthy state.''

Another factor bringing plastics firms to the auction block is the trend toward consolidation, Ridenour said, adding that many smaller plastics businesses are in a grow-or-die situation.

``Customers are winnowing suppliers,'' he said, adding that original equipment manufacturers are attracted to larger suppliers that can provide a consistent product globally.

``That's forcing the suppliers to either buy or sell or go into a joint venture,'' Ridenour said. ``They're being pulled kicking and screaming into new geographical regions. They say `We don't want to go, but we have to.' The smaller, family-owned companies simply don't have the capital, or feel there is too much risk to the family investment.''

The aging of the original plastics entrepreneurs has been spurring acquisitions, according to Smith.

``The owners are getting into their 50s and 60s,'' he said.

``Even if they aren't in the sell mode, if they have a really nice company they are being approached by people out in the street.''

Those kinds of offers can be attractive to company owners already considering retiring, especially if they do not have a second generation willing or able to take over, Smith said.

But the bonanza may not last long, both Ridenour and Smith warned.

Smith also is urging caution.

``There's a lot of uncertainty about 1998,'' Ridenour said, noting that much of the uncertainty centers on the direction interest rates will take.

``Much of the plastics business is dependent upon automotive,'' he said. ``And there is concern over automotive production if interest rates go up.''

Ridenour is warning potential sellers that ``market timing is critical.''