LAKE LAS VEGAS, NEV. — There are steps that plastics business owners can take to keep the mergers and acquisitions parade rolling into 2015.
M&A pros Deborah Douglas and Rick Weil tackled this topic at the 2015 Plastics News Executive Forum, Feb. 4-6 in Lake Las Vegas. Douglas is managing director of the Douglas Group in St. Louis. Weil is managing director with Mesirow Financial in Chicago.
“Private business owners do a great deal of good for this country,” Douglas said. “They deserve to win, and that's what we help them do.”
She added that although selling a business “can be traumatic” for business owners, it can also create “tremendous opportunities.”
“There are more buyers than ever before,” Douglas said. “But owners face a lot of trauma when they sell. We had one owner recently sell for $32 million when he had an offer for $35 million, because he thought the lower deal would be better for his people.”
Weil cited a Deloitte survey that said almost half of mid-market firms — with annual sales between $50 million and $1 billion — said they were likely to buy another company in the next year. Mega deals of $5 billion and up also could be returning to the industry, he added.
“There's so much information out there — companies are asking who do we go after and how much are we willing to spend,” he said.
Douglas listed several characteristics that could enhance the value of a plastics firm, including strong gross margins, steady growth, patented products or processes and powerful second-tier management.
“Buyers want people with some kind of skill that the competition can't match,” she said.
When seeking a buyer, it also helps to have customer contracts up to date and to have non-compete agreements in place with your employees. Possible detractions from making a deal include being dependent on a single customer, lack of a niche focus and a need for major equipment improvements, Douglas added.
Weil cited Novolex as an example of a recently successful plastics M&A deal. Chicago private equity firm Wind Point Capital assembled Novolex from plastics packaging firms Hilex Poly, Duro Bag, Fortune Plastics and Packaging Dynamics.
“It's remarkable to see what [Novolex] has put together and what they're going to do in the next couple of years,” he said.
