Pricing pressures may lead to resurging M&A market

La Jolla, Calif. — Although markets for plastic materials and processing are under pressure, mergers and acquisitions demands from the sector might be on the rebound.

Those were the views of Ashish Chitalia and Vikram Gore of management consulting firm Alvarez & Marsal. The two market veterans spoke March 12 at the Plastics News Executive Forum in La Jolla, Calif.

"There's pricing pressure on the entire value chain," said Chitalia, a director with the firm's energy and chemicals unit. This is due in part to slowing GDP growth in North America, Europe and China, all of which are high resin demand regions, he added.

"There's global overcapacity in resin and a lot of competition in finished goods," Chitalia said. Tariffs on Canada and Mexico proposed by President Donald Trump's administration could hurt markets for imported finished goods from those countries, but potentially could help U.S. companies in other areas, he added.

And in a classic squeeze, Chitalia presented data showing U.S. processors have seen their operating rates decline while similar rates have increased at their resin suppliers and for their customers at consumer products firms, automakers and similar businesses.

Between 2023 and 2025, operating rates at polyolefins makers rose from 75 percent to 85 percent, while the customer group saw operating rates increase from 82 percent to 88 percent. In that same period, operating rates at major plastics processors slid from 78 percent to 70 percent.

Gore, a managing director of energy and chemicals, said M&A activity in packaging and other markets had slowed recently because of higher interest rates, but appears to be moving upward again.

A recent Alvarez & Marsal study of 10 years of data from M&A deals involving plastics processors showed that more than half of those deals are accretive in value three years after they're made. Gore said some firms follow a "string of pearls" strategy of buying and combining smaller companies, while other deals are "mergers of equals," such as Amcor plc's pending acquisition of Berry Global Group Inc.

"Acquisitions can provide multiple layers and levels of sourcing improvement," Gore said. "They can bring together the best of both companies."