The pace of plastics mergers and acquisitions has remained strong in the second half of 2021.
Financial firm P&M Corporate Finance tracked more than 40 deals in August — the fourth straight month the market has hit that level. The August number was more than 50 percent higher than the total for the same month in 2020.
The current year "is on pace to see the most transactions in the past five years," officials with PMCF in Southfield, Mich., said in a recent market update. The film market in particular "has rebounded from a down COVID year," with 43 deals more than a year ago.
Resin suppliers also have seen high transaction levels "despite supply chain headwinds currently disrupting the subsector," officials added. They also said that plastics subsectors have gained from increased private equity participation, with 61 percent of August transactions coming from financial buyers.
Bluewater Partners LLC of Grand Rapids, Mich., agreed, saying in a recent update that overall M&A deal volume "increased sharply" in the second quarter, driven by liquidity, low borrowing costs and seller interest.
They added that valuation multiples rebounded during the quarter, returning to levels seen before the COVID-19 pandemic. U.S. GDP growth also increased during the quarter, which officials said "solidified expectations of a sustained economic recovery."
As a result, 2021 "is on track to become a record year for M&A activity."
"After a pandemic-induced pause, long-term trends and pent-up demand are powering acquisitions and divestitures," officials said. "The pandemic is causing many family- and founder-owned businesses to rethink their priorities and plans. The potential increase in the capital gains tax rate is motivating some sellers to pull forward their exit time frame."
Bluewater officials cited some potential risks to their outlook, including labor shortages and supply chain issues, faster-than-expected inflation leading to higher interest rates and lower deal activity or the delta variant of COVID-19 leading to lower economic activity and business confidence.
Since late August, Plastics News has reported on 21 M&A deals in the industry, a relatively high number for that period of time. Notable deals tracked in that span include:
• Plastics packaging maker Pretium Packaging LLC buying Alpha Consolidated Holdings Inc. in a move that adds 10 locations. Bottle and jar maker Alpha has 10 manufacturing sites, including two in Europe, that now will combine with Pretium's 19 locations.
The combination will push Pretium into the top 10 blow molders in North America with estimated sales in that segment of the business at $700 million, according to the latest PN ranking.
• Pactiv Evergreen Inc. buying Fabri-Kal Corp., a maker of foodservice products and thermoformed packaging, in a $380 million deal. About 72 percent of Fabri-Kal's business is in foodservice and the remaining 28 percent is in consumer products. Fabri-Kal, of Kalamazoo, Mich., has annual sales of $334 million. The firm operates four manufacturing sites in the U.S. and employs about 1,000.
• Compounding firm Star Plastics Inc. was acquired by Akoya Capital Partners. Star does compounding work in polycarbonate and also offers toll compounding services. Star employs about 175, operating plants in Ravenswood and Millwood, W.Va.
The firm also has production partnerships in China. Akoya is a Chicago-based private equity firm. Its current portfolio includes Beacon Manufacturing Group, which does some injection molding work, and Trinity Technology Group, which makes specialty fluoropolymer film.
• Materials firm Teknor Apex Co. acquired the dry color business of Dorum Color Co. The deal is an asset purchase, with Dorum customers now being supplied from a Teknor Color plant in Henderson, Ky. Teknor officials said that Akron, Ohio-based Dorum has a singular focus on the rotational molding market.
Frank Esposito is a Plastics News senior reporter. Follow him on Twitter @fesposito22.