The Packaging Industry — 4 Trends Driving M&A Activity

25 March, 2019

Today’s packaging industry M&A activity remains heightened and shows no sign of slowing down. In the first half of 2018, there were 156 acquisitions of packaging companies totaling $40.9B, a pace well ahead of 2017’s record 307 transactions totaling $52.8B. Statistics indicate that the world packaging industry’s market value will reach $1 trillion by 2020. That’s up from $839 billion in 2015.

These numbers make the packaging industry a darling for both strategic and sponsor investors who are drawn to the ongoing consolidation of an industry that remains largely fragmented, growth tailwinds provided by eCommerce, on-the-go food and beverage and healthcare markets, and the industry’s defensive characteristics.

According to an annual packaging report published by William Blair, an investment banking group, the robust demand for packaging assets is reflected in the valuations of these companies. In the first half of 2018, the median EV/EBITDA multiple for packaging acquisitions was 9.4x, well above the longer-term median of 8.3x since 2006. The healthy valuations achieved by sellers have been supported by lenders’ willingness to finance packaging acquisitions, with leverage multiples today sometimes surpassing 7.0x total debt / EBITDA.

CURRENT AND ONGOING TRENDS

The report from William Blair highlights several trends that are driving dealmaking activity in the packaging industry. 

TREND #1 — Financial Sponsors Aggressively Pursuing Platform Assets

In addition to packaging companies’ ability to generate strong cash flow, the packaging industry has displayed a relatively high degree of defensiveness during previous downturns, especially packaging assets with a meaningful presence in the healthcare and / or food and beverage end markets. Financial sponsors have been particularly attracted to packaging companies with the scale necessary to serve as a platform asset.

TREND #2 — Healthcare Drives Premium Valuations

Due to the healthcare industry’s above-GDP growth and high regulatory and technical requirements, packaging companies serving healthcare end markets consistently achieve valuations higher than other packaging companies. This is especially true for companies focused on technologically enhanced medical devices and components. Because they serve a challenging and tightly regulated niche market, packaging companies that serve medical end markets also enjoy more loyal customer relationships, more stable revenue, and greater pricing power.

TREND #3 — eCommerce Spurs Growth and Innovation

As eCommerce continues to grow, so does the need for protective packaging and inside-the-box systems to meet the needs of eCommerce’s complex distribution chain that may involve multiple distribution centers. There are also opportunities for packaging companies to create innovative solutions that minimize a package’s footprint while maintaining its protective properties.

TREND #4 — Sustainable Solutions

Along with functionality and convenience, environmental impact remains one of the main criteria for consumers when making buying decisions. While plastics will remain an integral part of packaging for the foreseeable future due to convenience, cost and performance, packaging companies will continue to look for ways to reduce the environmental impact of their products. Companies that are able to incorporate sustainable solutions while maintaining performance will enjoy tremendous growth opportunities and be highly sought after in the M&A arena.

INDUSTRY WEBINAR

To further explore past and future M&A trends in the Packaging industry and what it means for investors and ongoing M&A activity, we invited M&A and Packaging industry expert Jonathan White of Mazzone and Associates to provide a review that digs into the trends and numbers and to clarify what is attracting investors, who these investors are, and how they are using M&A to further their strategies.

To explore this burgeoning sector, the fervent M&A activity within it, and what it means for the future, watch the webinar playback today.

M&A in the $800B+ Global Packaging Industry: Latest Trends You Should Know
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ABOUT JONATHAN WHITE

Jonathan White joined Mazzone & Associates in 2017. As a Managing Director, he focuses on industrial transactions, primarily in the plastics, packaging and manufacturing space. He has successfully completed sell-side and buy-side representation, joint ventures, and recapitalizations across a variety of industries but with specific expertise in packaging, plastics, and printing related markets.

Mr. White brings a wealth of experience not only from Investment Banking but also from Corporate Development and Financial and Operations Management. Prior to joining the firm, he was a Senior Director of Strategic Investments for Jabil Inc. (NYSE: JBL), where he engaged in defining and executing Jabil’s expansion into the consumer packaging industry. Prior to Jabil, Mr. White served as a CFO and Development Officer for two private groups investing in manufacturing, where he both managed platform companies and refined portfolios through acquisitions and divestitures. Mr. White started in the packaging industry in Corporate Development and Operations Management for Rexam PLC.

Mr. White received a B.S. from the University of North Carolina at Chapel Hill, where he was elected Phi Beta Kappa, and an MBA from the Darden School of the University of Virginia. Learn more.