The pace of plastics mergers and acquisitions activity slowed a bit in the second half of 2014 — but market watchers have high expectations for 2015.
Financial firm P&M Corporate Finance tracked 165 deals in the last six months of 2014 — down about 6 percent from the first-half total. The full-year total of 341 was up 4 percent vs. full-year 2013 and close to the market's seven-year average of 347 deals.
The automotive end market showed the greatest annual growth in plastics M&A, with the number of deals in that sector more than doubling, from 19 to 39. The industrial and food and beverage end markets also each posted double-digit percentage hikes from 2013 to 2014.
Deals in the consumer end market, however, slumped 31 percent, falling from 42 deals to 29 in the same comparison.
Based on process, injection molding had the best growth rate in plastics M&A in 2014, jumping 10 percent to a total of 95 deals. Thermoforming and sheet had a year to forget, with the number of deals in that process category slipping almost 40 percent to 23.
Packaging again played a big role in plastics M&A in 2014, accounting for 29 percent of all deals, but that share was down from 36 percent in 2013. The number of global plastics M&A deals that involved U.S.-based firms remained steady at 43 percent in 2014, down only 1 percent from the 2013 level.
“I don't view  as a high — it was kind of like an average,” P&M managing director John Hart said. “There are a lot of positives about the economy and the health of the plastics industry.
“The auto industry is healthy again and we're seeing an
increase in inquiries for strong auto companies,” he said. “These had been unattractive in the recession and now we're seeing them come back into favor.
“In general, multiples are up,” Hart added. “And that might push sellers to consider deals.”
Plastics M&A veteran Thomas Blaige is even more bullish on the market, saying that his Chicago-based firm tracked 431 global plastics deals in 2014 and expects that number to break 500 in 2015 — an increase of more than 15 percent.
“The No. 1 thing we're seeing is that companies that had been coming out of the financial crisis with poor performance have improved,” Blaige said. “Seller psychology is back.”
Even if the deal totals showed modest growth, several plastics M&A pros were impressed with the level of action seen in the market during 2014.
“We've been incredibly busy — more than we've ever been,” said Terry Minnick, owner of Molding Business Systems in Florence, Mass. “This is the best M&A market since ‘05. We've got the perfect storm of processors in general doing better — so if they're looking to sell their business, their numbers will be good — and corporate profits are up, so there's a lot of demand from both financial and strategic buyers.”
Minnick's firm currently is working on 13 deals. If completed, he said that would be its busiest year ever.
“We usually do a half dozen,” he said.
Rick Weil, a managing director at Mesirow Financial Inc. in Chicago, said that a week hardly went by in 2014 without a big transaction being announced.
“There was so much M&A activity in 2014 it's been crazy,” Weil said in a telephone interview. “I counted 32 deals from January 2014 through the end of last year in rigid plastic packaging — not even flexible, just rigid plastic packaging. There's a confluence of fewer targets and lots of capital chasing them, whether it's private equity or strategic buyers.”
At Polymer Transaction Advisors Inc. in Newbury, Ohio, owner Bill Ridenor said his firm is working on at least five deals and is seeing plastics business pricing “at all-time historic highs — I'm seeing prices I'd never think we'd see.
“With stocks increasing in value, there's a lot of equity to put into deals,” he added. “Interest rates are at historic lows and conventional bank lending is cheaper than it's ever been.