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.
