In a surprising turnaround, strategic buyers in the plastics market held off the private equity barbarians at the gate in the first half of 2019.
PE firms had made inroads against strategic buyers in recent years, but in the first half, the number of PE-related plastics deals declined from 88 to 73 when compared to the first half of 2018. That's a drop of almost 20 percent.
"The strategics have stepped up in the first half," said John Hart, managing director with P&M Corporate Finance in Southfield, Mich. "They're outbidding and outselling private equity now. They're going to these owners and founders and saying they can do something with their companies."
Strategic buyers "are saying they can bring more resources or saying that private equity will flip the company in a few years and pile on debt," Hart added.
The overall number of plastics deals grew 3 percent, from 164 to 169 in the same comparison, according to PMCF data. By end market, the number of construction plastics deals more than tripled in the first half from five to 17. The number of medical plastics deals was up 50 percent, while the amounts of industrial and consumer deals each dropped more than 15 percent.
By sector, the number of first-half injection molding and specialty deals each was up at least 10 percent, while the number of sheet/thermoforming deals slipped by 25 percent.
By product segment, the number of building products deals — as in construction — more than tripled. Custom molding deals also saw a robust jump of more than 50 percent, while the number of industrial deals slid more than 10 percent.