Prea Ltd. is a Manchester, England-based global consultancy that specializes in the polymer industry and headed by Pravin Mistry.
At NPE2024, the company is represented by Adrian Goode, an ex-United Kingdom national who became a U.S. citizen and now work from Naples, Fla.
Prea offers a variety of consulting services including recruitment and advising on mergers and acquisitions. Both Mistry and Goode have years of experience in technical and management roles.
"Obviously working in the industry, the experience we have of knowing the materials, processes and the markets and more importantly the people helps, we basically are on the same wavelength and are grounded," Mistry said.
Mistry and Goode talked with Plastics News about the state of the industry, their outlook and why they attend NPE.
Q: How long have you been tracking the North American plastics market, and specifically in an M&A role.
A: We work with strategics, private equity, venture capital, family offices and private investors.
We have been operating in the market for quite few years and operated mainly from Europe. Our first transaction for the USA was when we completed an acquisition in mainland Europe for a U.S. private equity company. We were then also asked to provide interim CEO, which we provided one of our associates.
Q: What's the market in North America like right now? What processes and end markets are doing well and are in high demand from buyers?
A: The market is challenging and unpredictable, just like the rest of the world. The only other countries that are outside the norm and doing well, are India and, to a certain extent, China.
There are so many challenges with geopolitical events, labor issues, wages, interest rates energy bills and dare we say it the elections! Labor is the biggest issue globally.
Markets that are doing well include raw material producers. For example, thermoplastic and rubber masterbatch and concentrate compounders.
In injection molding and extrusion, a variety of markets — industrial, medical, automotive, aerospace. A demand for distribution companies has surprised us for the last few years.
To a lesser extent, composites, adhesives and polyurethanes, but they are holding their own.
Recycling that was once in the top five, but it has reduced significantly.
Our mandates are quite open but there is a preference for owner and family-owned businesses and carveouts, not only in North America but in Europe as well.
We have a variety of companies for sale in Europe, North America, India, plug and play, operational and profitable.
Q: Are you seeing more distressed deals now, and if so why do you think so?
A: Yes, we are seeing a steady increase in distressed deals, there seems to be a trend where, interest rates, cash flow and uncertainty has caused problems.
More and more suppliers are asking for payment via proforma as they are nervous. Again there is a lot of hesitancy in the market nationally/globally for the aforementioned reasons.
Don't get us wrong, there are companies that are doing well and keeping their heads low for obvious reasons
Q: You're attending NPE, what's your goal at a big trade show like this?
A: Our aim is to see existing clients and develop new ones.
We are looking to see if there are any companies that are looking to buy or sell within or outside the USA or looking to expand outside the USA into mainland Europe, the U.K., India, Nordics or elsewhere.
On the acquisition side we have mandates for plastic compounders, injection moulders, composite manufacturers. Our buyers are looking to acquire all or part of the companies. With our private equity clients they are looking for management buyout deals and to retain management and offer equity in the company.
For recruitment we are looking for sales managers in composites, sales managers in compounders, there is a variety.
Other goals are to see if companies are looking to utilize our expertise with recruitment, restructuring, lean manufacturing and polymer technical consultancy.
Some of our clients use our geographical locations to represent them or to do their technical consultancy where they do not have representation, we offer a rapid response service to resolve the issue.
Q: Have you been to NPE before?
A: We have been before, we were supposed to be there in 2021, we were geared up and obviously everything was canceled due to the global pandemic.
We ended up communicating via email, Teams, Zoom and telephone with potential clients and started to build relationships further.
Q: Are European buyers looking for deals in North America, and if so why?
A: Its not just Europeans including U.K. buyers, they also include Indian buyers that are looking for deals. Note it is a two-way traffic, with American companies looking for deals outside America.
Parties do not want to start off from ground zero or with a greenfield site due to time and cost. All parties are looking for horizontal and vertical integrations, most of which cannot be achieved by organic growth.
Q: What's your outlook for the rest of the year and for 2025, how does the election impact your thoughts? And what other factors are important?
A: Good question, it is an open book.
Since the lessons learned through COVID, companies want to decentralize and reduce risk of complete stops in geographical areas or countries.
Manufacturing is returning to the USA in some part, challenges here, like most of Europe, is that many skills have been lost or skilled people have moved to more lucrative careers. We need to see some balance in pay scales and compensation levels to attract talented people into manufacturing and science-based skills.
Trade and technical schools are growing to train the work force, this will take time due to skilled craftsmen retiring and not being replaced for many years. We are seeing a change in approach that technical skills are important to the country. From a manufacturing point of view, we will probably see more automation in time, where applicable, to ease this situation
Elections — ooh, sharp intake of breath! Elections are taking place in several countries and there are global challenges and tensions.
It depends what political party comes in, what the policies are in place, what other events take place around the world. At the moment it is a case of what if. Because manufacturing needs to be closer to home.
We think that incentives and financial aid need to be given to manufacturing companies for investment in machinery, people and training. Government needs to think and invest long term and assist with manufacturing.
The cynical side of me says globally, political parties and politicians come and go, we still be here mopping things up.
Q: How active are private equity buyers now?
A: Very active, there is plenty of "dry powder" (cash available) as they say and with valuations in the USA remain higher than those seen in other parts of the world and are typically six to eight times EBITDA. Note European valuations are slightly lower.
Private equity firms are actively looking to buy manufacturing companies and retain the management and technical teams in place, as this knowledge and experience has great value.
With many PE companies targeting manufacturing as well as service industries, there is a shortage of available businesses for sale. At the same time, these establishments are retaining the companies longer.