Although fourth-quarter deal volume was "a little light," according to PMCF Managing Director John Hart, it was in line with the second quarter.
"The third quarter was strong, with high levels of activity and a lot of add-on growth," he said. "If you're a seller without a good succession plan, it might be better to sell to a strategic add-on. They already have infrastructure in place and can provide a path to retirement.
"Private equity has had a major impact on plastics and packaging M&A, and within private equity, there's been a big shift from platform to add-on."
Private equity buyers remained strong in 2019 — involved in 45 percent of deals — but Peter Schmitt, managing director of Montesino Associates LLC in Wilmington, Del., said that because of peak multiples, PE firms "have begun to reexamine the model" for investing in plastics and packaging.
"From a buyer standpoint, there's still a large number of [PE] buyers out there, even if we haven't seen an uptick in valuations," Andrew Petryk, managing director at Brown Gibbons Lang in Cleveland, said. "That level of interest held strong throughout the year and we see that continuing into 2020."
Phil Karig, managing director of Mathelin Bay Associates in St. Louis, added that "there's still a lot of [PE] money out there … and there doesn't appear to be an end to that anytime soon."
PE firms "are getting a little more sophisticated" in putting together platforms that have "the gunpowder of PE and the expertise of strategic," Karig said.
Strategic buyers "have been pretty active overall, but PE buyers also have been very successful and equity markets have been strong," according to Matt Yohe, a partner with MPE Partners in Cleveland.
"For a good chunk of 2019, PE companies were winning vs. strategics," Rick Weil, managing director with Mesirow Financial in Chicago, said. "Financial buyers were as active as ever on valuations and they've become more disciplined to what to be excited about. They used to throw money at anything, but now that's not the case. If an acquisition target has great margins, they'll get a big price."
Stout Investment Banking of Chicago showed a slight decline in plastics and packaging deals for 2019, but managing director David Evatz said the market was still very strong for both strategic and financial buyers.
For deal volume, 2019 "was in the same ballpark" as 2018, according to Thomas Blaige, chairman and CEO of Blaige & Co. in Chicago.
"There are a lot of serial acquirers out there, but some PE firms are getting really finicky," he said. "Strategics have been more reliable. A PE company signing a letter of intent isn't necessarily a sign of closing a deal."
PE "has never had more money to invest than they do now, but valuations are higher," Tim Burns, senior adviser of Cranial Capital in Solon, Ohio, said. "Six to eight times EBITDA was the old range, but now it's 8-10 for packaging," he added. "Even vagabond companies can sell in the mid teens. And corporate buyers have suffered because they can't chase deals like PE does. But in some cases they can still push out PE if they're big enough."