To borrow from Mark Twain, reports of the death of plastics M&A have been exaggerated.
Plastics mergers and acquisitions activity was up in 2024, even if that data didn't match the mindsets of many financial pros interviewed by Plastics News for this week's 2025 M&A outlook. Many of these market veterans sounded like they had spent 2024 walking through a minefield while blindfolded.
Why did their frames of mind not match information from P&M Corporate Finance, which showed deal volume up 5 percent vs. 2023? Well, for one thing, it's been a little harder to get deals done in the last couple of years, especially with high interest rates in the U.S.
Interest rates began to climb from historic lows of 0.25 percent in March 2022 and, after a series of increases, reached 5.5 percent in July 2023. The Federal Reserve then made three rate cuts totaling 1 percent in the last four months of 2024, dropping the Fed rate to 4.5 percent.
Even with those cuts, interest rates remain well above the levels they were at for most of the last decade. Higher interest rates can affect M&A deals by increasing the costs of borrowing, leading to lower earnings multiples and lower sale prices.
More rate cuts were expected during 2025, but recent reports of strong economic activity now make that less likely to happen. Deal volume in the first half of 2024 also was flat vs. the same period in 2023. That result also might have been playing in the minds of financial pros in recent conversations.
The cautious and subdued spirits of 2024 might dissipate in 2025, as those same financial pros are optimistic about the new year. Private equity companies are expected to sell off more of their plastics holdings in 2025, after many of them sat out 2024 in hopes of getting better prices.
And longtime plastics entrepreneurs looking to sell and retire also might find better deals in 2025 after posting results in 2024 that were largely free of pandemics, ice storms, supply chain challenges or any of the assorted mayhem that has beset the industry since 2020.
If the dreams of financial pros become reality, then we'll have a healthy plastics M&A market in 2025 — even if we don't yet have the hovercars and robot butlers that many of us had expected by this point in the 21st century. Maybe next year!
Frank Esposito is a Plastics News senior reporter who covers M&A and materials. Follow him on X @fesposito22.