CHICAGO — Sandwiched between large suppliers and large customers, many plastics processors are feeling the squeeze and they ought to feel the need to push back some how to keep their positions, according to experts.
The immense pressure put on small and mid-size companies is going to intensify and those without a strategy will find it harder to compete, said investment banker Thomas Blaige, CEO of Blaige & Co.
“Essentially the independents are under attack,” Blaige told business executives and representatives at the Plastics News Financial Summit on April 2 in Chicago.
His firm's data on almost 1,500 plastics processors indicates 76 percent of companies are under $50 million and 84 percent are under $100 million. A lot of family businesses and entrepreneurs make up the mix and they have some big decisions to make in an industry where the large and strong have staying power because of access to capital.
“This problem is for eight out of 10 plastics processors to determine where they go and what they do,” Blaige said, adding that he is issuing a call to action.
He said plastics processors can join forces, sell, stay independent, try to grow or even shrink by divesting a product line or division.
Strategic buyers are making acquisitions to broaden their product offerings and offset their slow and declining growth areas.
However, the private equity groups are the most active acquirers, especially in the injection molding, film and sheet, and blow molding segments. Sixty percent of the top 50 blow molders — 35 companies — merged or sold from 2001 to 2012.
In almost the same period, private equity capital has increased ten-fold to $500 billion as more firms form and individual investors, such as Baby Boomers, follow institutional investors.