Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Resin pricing news
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • CEO Issue
    • Diversity
    • Best Places to Work
      • 2022 winners
    • Processor of the Year
    • Rising Stars
    • Women Breaking the Mold
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • BRICS and Plastics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • Injection Molding & Design Expo
    • Reuters Responsible Business Europe 2022
    • Reifenhäuser Technologies Livestreams
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Resin Prices
    • All Resins
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Custom
    • Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. Perspective
July 25, 2000 02:00 AM

Mergers, acquisitions target focused firms

Deborah L. Douglas
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    The plastics industries have held a long-term position as one of the most active segments in the world for mergers and acquisitions. The strength and duration of the sellers´ market has been amazing, but the industry has evolved for both buyer and seller, as both have become more sophisticated and more focused.

    Prices have continued to climb for the most desirable sellers — but the best buyers increasingly compete for a precious few select sellers.

    There are certain special pockets of focus with particularly intense M&A activity. Prime examples include companies serving the computer and telecommunications markets, or medical product markets. There are a great many aggressive buyers for each seller in these segments, and pricing, as a result, is often astounding. These are broad and very common examples, but there are also dozens of smaller, less-visible niches that come and go constantly as the latest acquisition hot spot.

    One current example of such a target group would include what we might call "e-offshoots." They are the companies booming in secondary markets supporting a whole new type of commerce. They cater to the world of material handling, which supports the faster, inventory-reduced ways people are doing business today. They may make flexible belting or rollers for warehouse conveyor systems. They may make parts for precision sortation systems for United Parcel Service and Federal Express. They make lightweight parts for robotics equipment used in warehouses and plants. Douglas Group recently sold a manufacturer that had $40 million in annual sales in this segment for $67 million cash. Nice pricing!

    Whatever the niche may be for a plastics processor, those that are commanding the truly glorious pricing inevitably are those with a great deal of focus. When buyers target a company with a medical focus, they aren´t looking for the company with 30 percent, or even 60 percent medical customers. They´re looking for 90-100 percent concentration. They want companies with superb technology and specialized expertise in a growing and profitable market segment.

    The majority of processor companies serve a broad range of customers. These firms have grown up taking on new work as opportunities arose, with little attention to targeting any particular segments. Three-quarters of the world of plastic product manufacturers probably fall into this category.

    Buyers would categorize such a company as a "custom processor." With good technology, current equipment, and decent profits and growth, these firms are quite desirable, but at more modest pricing. At the other end of the scale, we find very focused manufacturers of plastic products, with patented technologies or product innovations of a proprietary nature. These tend to be the most profitable and often most desirable companies. These proprietary manufacturers might represent 5 percent of the total plastic product manufacturing population.

    A middle group, often in the hot market areas, includes a range of custom processors, without proprietary product, but with proprietary expertise and customer relationships in their specialty area. These companies tend to be technologically superior, with fast-growing and high-margin work, and often also can be at the top edge in desirability and pricing.

    Plastics manufacturing has taken huge strides over the past decade to become an international business. In the strongest growth segments, manufacturers today must develop capabilities to serve well beyond regional boundaries. New plants may be located adjacent to, or even within, customer facilities. Companies are becoming increasingly skilled at taking advantage of a technological edge by moving quickly to serve markets around the globe.

    In 2000 we estimate there will be at least three times the number of purchases of U.S. companies by European buyers than happened in 1995. Similarly, U.S. companies probably have doubled their purchases of European and Far Eastern divisions during the past few years.

    The larger companies have long understood the importance of world market capabilities. Today, however, even the midsized processor is developing international capabilities. The direct impact on merger and acquisition activities is a tremendous blossoming of worldwide interconnections and ever more complex buy/sell opportunities.

    Managing the cultural diversity of expanded international capabilities will create risk. Failures along the way will create opportunities for purchase of spinoff business segments. In summary, companies will continue to consolidate during the coming decade, and the changes to come will create tremendous opportunities for astute plastic companies in 2000 and beyond.

    Douglas is managing director of Douglas Group, a private investment banking firm in St. Louis that represents plastic company owners in the sale or purchase of businesses.

    RECOMMENDED FOR YOU
    Are bioplastics the green solution we have been waiting for?
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    More resins see April price hikes, but not polyethylene
    2
    New Hope building world's largest pyrolysis plant
    3
    Metro Plastics Technologies sold to NY investment firm
    4
    Report reveals ‘dirty climate secrets’ of PVC flooring
    5
    Colorado's EPR bill could mean higher materials fees
    SIGN UP FOR TO RECEIVE THESE EMAILS AND ENEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Urethanes Technology
    • European Rubber Journal
    • Tire Business
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • CEO Issue
        • Diversity
        • Best Places to Work
          • 2022 winners
        • Processor of the Year
        • Rising Stars
        • Women Breaking the Mold
      • Newsletters
      • Resin pricing news
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • BRICS and Plastics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
        • Injection Molding & Design Expo
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • Reuters Responsible Business Europe 2022
        • Reifenhäuser Technologies Livestreams
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Resin Prices
      • All Resins
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Custom
      • Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified