Kickstart: Quality the key in today's M&A market

The adage about quality being more important that quantity may play a part in mergers and acquisitions in the plastics industry.

Plastics News' Frank Esposito has a wrap-up of M&A activity during 2022, first noting that the total number of deals was down vs. 2021. A lot of that has to do with rising interest rates in the second half of the year.

But what may be surprising is that for the full year, the number of 2022 deals was actually higher than the last pre-COVID year, 2019. In 2022, there were 363 transactions. That's down from 485 in 2021, but still higher than every year since 2016. The bulk of those purchases were either strategic or add-on acquisitions for companies looking to improve already-existing business platforms.

"Pricing is down, and buyers are fleeing to quality," Andrew Petryk, managing director with Brown Gibbons Lang in Cleveland, told Frank.

For Montesino Associates LLC, there is "much more carefully thought-out activity," according to Managing Director Peter Schmitt. "It's not the free-for-all that it's been in recent years."

And obviously the details of M&A trends depends on the end market, so suppliers to the construction industry — already in a recession — struggle more to attract potential buyers than molders in packaging. Even then, the stronger your business, the better your chances of finding a good buyer.

"If you're a B- or C-[grade] business, it can be a difficult M&A market," Petryk said. "But if you're a B-plus or higher, with strong cash flow and growth, you can find plenty of buyers. Strategic buyers especially tend to have strong balance sheets and can understand a long play."

You can find this story and other coverage from Frank about M&A trends online now, and sign up for Plastics News Live for a special discussion on mergers and acquisitions with Frank and Editor Don Loepp on Feb. 1. The webinar is free. You can register here.

Quality is about more than sales, production and end markets, of course. Which brings me to Rising Stars.

Nominations are now open for the 2023 Plastics News Rising Stars, our 10th year of recognizing those people age 35 and younger who represent the next generation of leadership in the plastics industry.

As Special Projects Editor Jordan Vitick writes, this report will look at how young people are addressing issues such as sustainability, public service and career advancement. They may working at materials companies, in processing, in education, mold making, recycling or other branches of the industry.

Check out Jordan's column on Rising Stars for more information and for a link for nominations.

Public policy stories tend to be popular with PN readers. It makes sense since there's a lot of news about legislation impacting the industry — and a lot of legislation taking place on a global basis.

Our sister paper Sustainable Plastics looks at global sustainability moves in the January/February issue, available for a free download now.

As Editor Karen Laird writes: "The past decade or so has brought forth a whole new vocabulary to talk about sustainability. It is a vocabulary that many people are still struggling to master while trying to comprehend."