The successful run of the plastics mergers and acquisitions market should continue into 2015.
That's the expectation of Ben Whiting, chemicals director at KeyBanc Capital Markets in Cleveland. KeyBanc has been involved in several plastics deals in the last few years, most recently representing Citadel Plastics in its $800 million sale to A. Schulman Inc., which was announced March 16.
“The market is set up to continue to be robust in 2015,” Whiting said in a recent interview in Cleveland. “We should see continued growth because financial markets are strong.”
He added firms with EBITDA of $10 million or more should be able to command sale price multiples of at least 7, with specialty firms seeing multiples of 9 or 10.
“Organic growth is tough for strategic buyers to come by, even though the industry is doing well,” Whiting explained. “Automotive is close to peak levels, and building and construction has recovered, but it's not close to the build numbers we saw before. Packaging and consumer are still doing well.”
On the private equity side of the market, Whiting said that PE firms are value-driven and that they “love the chemicals and plastics space because of its free cash flow and fragmented nature.”
Lower oil prices seen worldwide since mid-2014 “are definitely a positive” for the economy overall, he added, but moreso for plastics firms because of lower resin prices. Even with those lower prices passed on to customers, Whiting said that good firms are able to hold on to some profit margin as prices are on the way down. Lower gasoline prices also help the consumer, he added.
Another trend to watch in the U.S. plastics field is the presence of buyers from other parts of the world. “The U.S. is more stable for Europeans and Asians,” Whiting said. “It's almost like an emerging market, because of its shale gas and stability.”
In addition to the Schulman-Citadel deal, recent plastics transactions that involved KeyBanc include PolyOne Corp.'s 2013 purchase of Spartech Corp. and the sale in January of Rhetech Inc. to Hexpol AB. KeyBanc also was involved in the 2012 sale of Citadel from Wind Point Partners to HGGC, which then sold it to Schulman.