Caps, closures attractive as M&A target

By Jim Johnson
Senior Staff Reporter

Published: October 30, 2013 1:46 pm ET
Updated: October 30, 2013 1:50 pm ET

Related to this story

Topics Packaging, Mergers & Acquisitions, Containers/closures

LINCOLNSHIRE, ILL. — When it comes to plastics caps and closures, interest in mergers and acquisitions continues at a strong pace.

“Really not a lot has changed in two years. There’s been a significant amount of consolidation in the space,” said John Hart, a managing director P&M Corporate Finance, an investment bank active in the industry. Hart leads the company’s plastics and packaging group.

“Clearly,” he said, there is a case of “active buyers exceeding the number of sellers.”

Caps and closure companies provide an attractive target for both strategic buyers — those already in the business and looking to expand — as well as private equity firms looking for investment opportunities.

“It’s a very interesting M&A market for caps and closures, to say the least,” Hart said during the recent Caps & Closures 2013 conference organized by Plastics News in Linconshire.

Private equity, thanks to cheap and plentiful money in the credit markets, has been quite aggressive in their valuations for the companies they target.

“Really, over the last two or three years, you’ve seen a significant uptick in private equity,” agreed Matt Bowersox, senior vice president with investment bank Houlihan Lokey.

Smaller caps and closures firms provide an attractive target for other companies looking to provide a broader, integrated product offering to customers, Bowersox said.

Packaging, he added, also is an attractive market because it does not generally see import risk from lower cost producers in China or other emerging markets.

Hart said he tends to be conservative in what he advises clients regarding the worth of their companies they are considering selling.

And, time and time again, he said he’s “been very surprised by the prices buyers are paying.”

Acquirers, Hart said, have been surpassing his valuation numbers for the past 18 months to two years. “They beat what I communicated to the client pretty much across the board,” he said.

Private equity has pretty much outbid strategic buyers on a fairly regular basis and that, he believes, will continue.

“If you are a buyer, it’s a very competitive marketplace to get deals done,” he said, as they are getting more expensive.

For company owners, however, this is a very good time to consider a sale.

Niche or smaller companies have been able to maintain their value in the industry by staking out a claim in a segment of the business. And that brings strategic buyers, looking to add on to their own portfolios, Hart said.

“You have a number of strategic buyers or consolidators that have significant interest in finding add-on acquisitions through their various platforms,” Hart said. “There’s still a significant customer base out there that values differentiation in products, unique technologies and customization and partnering with the customer to differentiate that customer’s product.”

“There’s just a number of niche companies out there where the big guys, unfortunately, have not been able to obtain the market share organically so they turn to M&A to acquire these niche companies that have very attractive margins and positions,” Hart said.

P&M Corporate Finance keeps a data base of deals in the caps and closure market. That information indicates that 55 percent of the transactions during the past five years have been made by strategic buyers and 45 percent by private equity players.

All of the M&A interest in the market in recent years certainly has had an impact on the size of the companies providing services. Back in 2008, a total of 51 percent of all caps and closure suppliers had revenue of less than $50 million and other 26 percent had revenue between $50 million and $199 million, Hart reported at the conference.

Consolidation has helped shrink the number of smaller companies with less than $50 million of revenue to only 18 percent these days. The number of companies with $50 million to $199 million has increased to 38 percent, he said.

The largest segment, those with more than $500 million in annual sales, has increased from 15 percent in 2008 to 22 percent in 2013. And the percentage of firms with $200 million to $499 million in annual sales has increased from 8 percent in 2008 to 22 percent in 2013, Hart said.


Comments

Caps, closures attractive as M&A target

By Jim Johnson
Senior Staff Reporter

Published: October 30, 2013 1:46 pm ET
Updated: October 30, 2013 1:50 pm ET

Post Your Comments


Back to story


More stories

Image

Amcor buys Chinese flexible packaging plant

December 18, 2014 1:47 pm ET

Australian-based global packaging company Amcor Ltd. is buying a Chinese flexible packaging business for 211 million RMB (US$31.4 million).    More

Image

Indian auto parts maker set to buy assets in Germany, Mexico

December 18, 2014 10:35 am ET

Indian auto parts maker Samvardhana Motherson Gropup is buying the assets of insolvent German plastics car parts producer Scherer & Trier (S&T).    More

Image

Sweden's Indutrade buys Belgian packaging firm Verbeek

December 18, 2014 9:42 am ET

Sweden's Indutrade AB has purchased all the shares in Belgium's Verbeeck Packaging Group.    More

Image

Röchling buys two UK firms

December 18, 2014 9:24 am ET

Germany's Röchling Engineering Plastics SE & Co. KG has expanded its presence in the high-performance plastics market by acquiring two British firms...    More

Image

Bubbles add some flair to 'Plain Jane' PET bottles

December 17, 2014 1:05 pm ET

Ron Puvak and the folks over at Plastic Technologies Inc. see big things coming from some very tiny bubbles.    More

Market Reports

Flexible Packaging Trends in North America

Our latest RESEARCH report examines trends in FLEXIBLE PACKAGING impacting the North American market including a review of economic conditions, key drivers of growth, materials pricing, M&A activity, sustainability challenges and the outlook for 2015.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 billion plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

October 27, 2015 - October 29, 2015Plastics Financial Summit - New York - 2015

More Events