Supply chain puts consolidation pressure on packaging sector

By Jim Johnson
Senior Staff Reporter

Published: February 13, 2014 3:20 pm ET

Image By: Blaige & Co. Thomas Blaige

Related to this story

Topics Mergers & Acquisitions, Packaging

ORLANDO, FLA. — Plastic packaging companies, feeling squeezed from both their suppliers as well as their customers, are looking at mergers and acquisitions as a way to stay relevant.

Plastic packaging deals dipped last year compared with the year before, but the number still was within the historic range of annual transactions since the turn of the century, according to Thomas Blaige, CEO of Blaige & Co., a Chicago-based investment banking firm focused on plastics, packaging and chemicals.

“In terms of what’s driving this M&A activity, it’s really the global consolidation. What does that mean? Well, there’s a lot of pressure on converters to consolidate. Why is that? Because the supply chain is consolidating, so you’ve got pressure upstream, downstream and from competitors as well,” he said recently The Packaging Conference in Orlando.

Packaging firms have some enormous companies on either side: both their suppliers as well as their customers who use the packaging to sell goods. And with consolidation occurring on either side, packaging companies are feeling the need to become larger and more diverse themselves.

“Converters are relatively small companies. You’ve got huge suppliers. You’ve got huge customers. And so, naturally, as they are growing and becoming stronger. You need to determine strategy to maintain your own strength and influence within the supply chain,” Blaige said.

Federal capital gains tax increases for 2013 helped pull deals into 2012 that would normally have closed last year, dampening the transaction total to some degree. Still, last year was still a solid year, conference attendees were told by panel of merger and acquisition experts.

“I think 2103 was a solid year for packaging deals. I think it was probably a better year for packaging than it was for M&A in general, which was down a little bit probably in 2013,” said Brett Snyder, president of Nicolet Capital Partners LLC, a private equity firm based in Chicago. “I think it was a steady year.”

“In 2014, at least in the early going … there are several fairly large transactions in the market right now, companies between $30 million to $75 million of operating income. I can think of a half a dozen off the top of my head that are in the market or coming to market shortly really across all areas of plastics,” he said.

“So I think it’s setting up to be a very good year for packaging,” Snyder said.

Nicholas San Filippo IV is a partner with Lowenstein Sandler LLP in Roseland, N.J., co-chairing the law firm’s corporate finance and securities practice group.

“The only thing that gives us some pause for concern is the uncertainly of the markets in terms of the stock markets,” San Filippo said. A downturn in the stock market could have a real impact on slowing down merger and acquisition activity, he said.

Jay Radtke, a director at private equity firm Mason Wells of Milwaukee, sees the increased level of transactions in recent years due to tax law changes continuing to have an impact on the number of deals involving family owned and privately owned businesses this year.

“I think that’s eventually going to change over the next five years with a lot of the retiring baby boomers,” he said. “I think that’s a very positive backdrop for packaging M&A in general.”

Another dynamic going on right now involves the “red hot” financing markets that are providing the kinds of cash to help boost valuations higher than typical. “I think any solid packaging business has a lot of options. And that is obviously pushing values,” Radtke said.

“I would say the multiples are a turn higher than what they’ve been historically. The world of packaging, one of the reasons we like it, is it’s relatively easy to understand. It’s very consistent. The multiples have tended to be in that 6- to 8-times range. I think right now you’re seeing a turn higher,” Radtke said.

“So it’s not a bad time to be thinking about selling your business right now if you’ve got a good story out there. There’s a lot of interest for packaging businesses right now,” he said.

“With the loosening in the credit markets, that probably helps that multiple come up just a little bit,” said Edwin Parkinson, president at Blaige & Co.

Blaige reported 138 plastics packaging deals in 2013, down from 169 in 2012.


Comments

Supply chain puts consolidation pressure on packaging sector

By Jim Johnson
Senior Staff Reporter

Published: February 13, 2014 3:20 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