CHICAGO — While plastics industry mergers and acquisitions continue to stay strong, there are areas where fewer deals are being made these days.
Plastic packaging remains popular for both private equity firms and so-called strategic buyers — folks in the same business looking to expand through acquisition.
But within that packaging sector, explained Managing Director John Hart of P&M Corporate Finance, the number of sheet and thermoforming deals fell noticeably in 2014 compared to the year before.
The reason is simple, said the leader of his firm's plastics and packaging group.
“The reality is that space is just consolidated to the point where there's just not a lot of available targets left,” Hart said at the recent Plastics Financial Summit organized by Plastics News in Chicago.
Sheet and thermoforming deals fell from 18 in 2013 to just nine in 2014.
Overall, plastic packaging merger and acquisition levels fell from 118 in total in 2013 to 99 last year, Hart said.
The overall trend in plastics packaging also reflects lower supply of available companies in the midst of continuing strong buyer demand.
Blow molding deals went from 22 in 2013 to 18 last year, while injection molding deals went from 26 to 21, Hart reported. Transactions involving film companies fell from 49 to 47, and those under the “specialty” category rose from three to four.
“This is a great example of where the supply demand imbalance is probably the greatest,” Hart said about the activity in plastic packaging.
Deal totals last fell below 100 for plastic packaging in 2008, when the financial crisis took hold and 91 transactions took place. They bumped back up to 116 in 2009, thanks in part to the number of moves involving distressed companies dealing with the troubled economy. Transaction totals then reached 131 in 2010, 114 in 2011, and 118 in 2012.
Hart called the last couple of years “the new normal” for plastics merger and acquisition activity.
“Looking into '15, our viewpoint in plastics is we'll be at similar levels as 2013, 2014. Very healthy environment. The macro factors are really helping plastics M&A and that's driving multiples up. A lot more private equity interest and strategic buyers sitting on a lot of cash,” Hart said.
“Plastic packaging, this is one of the sectors that probably has a higher level of private equity interest than what we see in other sectors like resin or compounding,” Hart said. “There's been a very high level of activity by both strategic and financial [buyers]. You see really since 2009 a very healthy level of activity.”
