International market pushing M&&A activity

Chicago — Anybody needing proof that the plastics industry is a global market can simply look at merger and acquisition market trends during the past 15 years.

Last year wasn't a record year for plastics-related deals, but it was pretty darn close.

Tom Blaige, CEO of Blaige & Co., a Chicago-based financial firm that deals in plastics, packaging and chemicals transactions, indicated at the recent Plastics Caps & Closures 2016 conference there were 523 plastics-related deals last year, down just slightly from 536 in 2014 and 540 in 2010.

Those numbers were up from about the 200 or so posted in both 2001 and 2002.

“Most of that growth has come from international activity, really activity not involving anything to do with the U.S., a lot of cross-border international activity,” he said.

And not only has overall deal-making increased dramatically, but deals in the packaging sector of the industry are up substantially as well from 71 in 2001 and 50 in 2002 to 164 last year, Blaige said at the conference organized by Plastics News.

Deals in other segments of the plastics industry, in both industrial and raw materials, also are up substantially over time.

Global consolidation brings what Blaige calls a “squeeze” on plastic packaging manufacturers and converters from the upstream of raw material prices and the downstream of their customers.

But globalization also brings opportunities for packaging companies as consumer product goods firms look to consolidate their suppliers.

“When you think about a company like Coca-Cola or another large CPG company, when they want to go, they want to go fast. They don't have the resources to help 90,000 suppliers in 15 companies to figure it out. So if you are able to consolidate and bring the same experience to customers globally, I think you have a chance of putting something together that's pretty special,” said Rick Ritter, general manager of Jabil Packaging Solutions, formerly called Nypro Packaging.

While striving for consistency around the world, global packaging companies need to make sure they are fitting in locally while also serving their customers.

“It needs to be by that culture and those folks, and we need to make sure the communication is proper. We need to make sure that everything is set up appropriately for long-term running, simple running and profitability for our customer,” said Jeffrey Kolbow, CEO of MGS Manufacturing Group, a maker of tooling, molding and equipment systems.

“You still need to get down with your feet on the floor, and it's not always seamless and it takes lot of work to make sure you serve the whole company. We all need to work harder to make it seamless,” he said.

Blaige also took a deeper dive into the injection molding portion of the business. He indicated that 61 percent of the deals he spoke about are from strategic buyers, or people already operating in the business. The other 39 percent are from financial buyers looking to make an investment in the industry. But of those financial buyers — think private equity firms, for example — 16 of the 39 percent are adding on to their existing plastics-related holdings.

So that means 77 percent of the deals are from folks looking to bolster their holdings in the business.

Blaige added that 51 percent of the deals were international, 40 percent in the United States and 9 percent a combination of the two. That compares to between 30 and 40 percent international 15 years ago.

“That's where we're seeing the growth is transactions in developing economies. Why is that? Well, because acquirers are seeking growth. Where is the growth? The growth is in developing economies,” he said.