Investor appetite for packaging sector is good news for small entrepreneurs
In 2014 the level of Mergers and Acquisitions (M&A) in the global packaging industry reached US$30bn. This is the highest level since the 2007 peak of $33bn and a significant step up over the 2012 figure of $18bn. 2014 witnessed some very significant transactions such as the acquisitions of Mauser for $1.7bn by Clayton Dubilier and Rice, SIG by Onex for $4.6bn and Constantia by Wendel for $2.8bn. That’s $9.1bn of packaging M&A in just 3 deals! Also in 2014 Private Equity firm Platinum acquired pressure sensitive materials business MACtac from Bemis.
All of these deals show the strong appetite for packaging in the financial sponsor or private equity community. For FINAT the last of these deals is perhaps the most interesting. Constantia which is a significant player in the labels industry globally was previously a family company, which had introduceda private equity co-shareholder in 2009. The company went on to acquire Spear, another family labels operation with private equity shareholders,in 2013.
So will we see a year like this again? Well, 2015 is off to a flying start. Already announced is the Ball acquisition of Rexam for $6.7bn and the rumoured bid by International Paper for Smurfit Kappa for $8.9bn.And, in the release liners market, Intermediate Capital Group has invested in Loparex.
When there is a flurry of M&A activity, even at the upper end in terms of deal size, it often sets off a wave of M&A throughout the industry. This can be because mid-market players feel that they need to scale up to compete with the newly enlarged rivals. Mid-market acquirers typically make acquisitions which are smaller than they are so this can feed down to even modest deals involving private companies.
This could be good news for entrepreneurial baby-boomers who are thinking of realising their investment,as bidders may be in a hurry to make an offer and may even be persuaded to pay a premium.
Nick Mockett Moorgate Capital