CHICAGO — A. Schulman Inc.'s acquisition spree was already underway when James Irwin joined the firm — but it's continued to roll since then.
“This is a fun time for M&A in the plastics sector,” Irwin said June 3 at the Plastics Financial Summit in Chicago. “We've seen an increase in the availability of capital and in the number of corporations with healthy balance sheets.
“There are a lot of good companies reporting good results and a lot of cross-border deals,” added Irwin, who joined Fairlawn, Ohio-based Schulman as vice president of corporate business development in 2014. “The quality of the underlying business determines valuations and multiples.”
Schulman — a leading compounder and color concentrates maker — has completed 11 deals in less than six years, most recently including its blockbuster $800 million pickup of Citadel Plastics earlier this year. The firm has spent almost $1.4 billion on those 11 transactions.
“We had done most of our business in Europe, but we wanted to look for more value in Asia and the U.S.,” Irwin said.
And even though the Citadel deal was larger than Schulman's previous 10 deals combined, Irwin said the firm took the same approach that it takes for each deal, regardless of size.
“We knew we wanted to take a second route and look for deals that were more transformational in nature,” he explained. “We prepared the staff for that move, so when we found one, we were ready.”
At the event, Irwin was part of a panel that included Western Reserve Partners LLC managing director Kevin Mayer, Jones Day partner Lisa Lathrop and Adam Piatkowski, managing principal at Graham Partners.
Mayer — whose investment banking firm is based in Cleveland — said that global M&A deal volumes were up at least 4 percent in 2014, with strategic and private equity players both very active. Even after a busy year, firms in the S&P 500 still have $1.7 trillion of cash on hand that they easily could invest. A similar amount is available in the private equity market, he added.
“It's a favorable market for sellers today, with upwards of 10 times EBITDA multiples,” Mayer said, adding that in spite of consolidation in the plastics marketplace, there's still a supply/demand imbalance, with interested buyers outnumbering sellers.
Newtown Square, Pa.-based Graham is looking to be a value-added partner and is “uniquely attracted to family-oriented businesses,” said Piatkowski. Graham's plastics holdings include packaging firm Comar LLC.
He added that firms looking to sell often have to decide between private equity and strategic buyers, based on what outcome they prefer. “Some want to partner with a strategic because they need some aspect of that business,” he said. “But some want a financial acquirer so they can maintain their own identity.”
Lathrop, who runs the private equity practice at Jones Day's Chicago office, agreed that the current M&A market “is definitely a seller's market — especially on risk allocation.
“I can't echo the need for preparedness enough,” she said. “You need months, if not years, in advance — not two weeks. A private company that's owned by a fund is in constant preparation for the sale process.”