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How important is an M&A strategy?

By: Don Loepp

January 31, 2014

Mergers and acquisitions are important for a pretty big chunk of Plastics News readers. I know that because many of our best-read and most-talked-about stories are about deals.

When processors and suppliers are bought and sold, their customers, competitors and colleagues are interested. We hear all the time about how a merger will have a domino affect in the industry. Supplier relationships can be disrupted. Talented managers and sales staff can find themselves on the job market. Tools end up moving to new locations.

Deals can mean lost business, or new opportunities.

Because M&A activity is so important, we end up covering a lot of deals in our newspaper each week. And twice a year we do a special report on the latest trends. Our first 2014 M&A special report starts on Page 1 of this issue.

If you're a company owner, I imagine you're tempted to jump ahead to the part about multiples — you know, how much wealth are you sitting on?

Even if you're not interested in selling right now, successful companies are always fielding calls from M&A advisers and private equity investors. Some of you hang up the phone, or don't return the calls. Others listen and learn what they can about the market and their competition. It's getting to the point where a molder can find out a lot about the industry by talking with an M&A expert with an MBA the same way they used to catch up on scuttlebutt from their mold component supplier!

Plastics News has been reporting on M&A activity for nearly 25 years, and it's been a pretty interesting topic. We've seen a few waves of consolidation in some markets, and the rise (and fall) of quite a few rollups and private equity purchasers.

But despite the past few decades of pretty intense M&A activity, this industry is still populated by a lot of family-owned companies. That's a result, in part, of the plastics industry's relative youth. There are still many extremely successful first-, second- and third-generation companies. While we've all heard the statistics about how many second- and third-generation companies end up failing, plastics entrepreneurs can take some solace in the knowledge that if their companies survived through the Great Recession of 2009, they should be pretty well prepared to handle just about anything.

All that said, I wonder how much serious thought family-owned companies give to their M&A strategy. It's an important part of succession planning, of course. But it's also a way to take advantage of the opportunities that present themselves in the market, whether that means consolidating a position or pursuing a diversification strategy.

Not to mention maximizing asset value and minimizing the tax implications of their decisions.

Loepp is editor of Plastics News and author of "The Plastics Blog."