Schaumburg, Ill. — Every plastics M&A deal is special in its own way. So successful dealmakers need to be able to react and respond.
A panel of four market veterans explored these deal dynamics at the 2019 Plastics News Financial Summit, held May 21 in Schaumburg. The panel was moderated by Michael Benson, managing director of Chicago-based investment banking firm Stout.
"We look at many factors, including the ability to pass on resin price increases," said Jim Rikkers, senior managing partner at Spell Capital. Minneapolis-based Spell has made multiple plastics deals in the last two decades. Its current plastics holdings include injection molder Viking Plastics of Corry, Pa.
Viking President and CEO Kelly Goodsel had acquired Viking in 2006 before selling it to Spell in 2016. He said that at some point in most negotiations, purchase price "becomes only No. 3 or 4 on priorities, after what you're doing to my plant and my people."
Rikkers added that when looking at potential acquisitions, a firm's move to automation is important because of the tight labor market. Spell "is focused on the low end of the middle market — and plastics has been very fertile ground for us," he said.
Michael Molling and Matt Yohe were involved in investment firm MPE Partners' acquisition of injection molder Plastic Components Inc. in 2017. Molling said that process began when then-PCI owner Tom Duffey wanted to take a step back from managing the Germantown, Wis.-based firm.
Yohe is a partner at Cleveland-based MPE, while Molling previously worked for Stout and now serves as PCI's chief financial officer.
PCI's patent on lights-out production technology was important in the acquisition process, Yohe said. The firm now is looking to grow organically and through acquisitions, he added.
For future transactions, Molling said the conditions of a firm's book of business and of its customer relationships are important. Yohe said that MPE would prefer a company with a more diversified customer base, since a concentration of sales can equal risk. He added that the firm "wants a high level of customer retention."
The acquisitions of Viking and of PCI have gone smoothly, but Goodsel said that those cases "aren't always the rule." He cited the example of a Pittsburgh-area plastics firm that was bought by a private equity buyer, only to have the buyer start showing up at the office every day because he lived in the area.
"You don't want that guy in there every day," Goodsel said.
Goodsel added that it's important for plastics business owners to be looking toward the future of their firms.
"You need to be selling your business every day," he said. "And you need to run your business like normal no matter what point you're at in the acquisition process."