Plastics M&A Pulse – 2023 Year In Review

Global Plastics M&A had a strong year in 2023, recording 382 transactions, which was above 2022 levels and tied for the third-highest level of annual deal activity since PMCF began tracking the space in 2005.

While deal announcements in 2023 surpassed 2022 levels, the year was really a tale of two halves. Unfavorable market conditions, including rising interest rates, inflation, and a negative economic outlook carried over from the second half of 2022, affecting activity in the first half of 2023.

Yet, unlike 2022 when deal activity fell in the second half of the year, H2 2023 exhibited the opposite trend, outpacing the first half of the year and leading 2023 to exceed 2022 levels. While improving market conditions likely played a role in the elevated levels of deal activity, transaction announcements in the fourth quarter may have also been the result of processes that were put on hold in Q1 but closed later in the year.

While 2023 deal volumes show that the plastics sector continues to be an attractive area for M&A, it remains to be seen whether deal volumes witnessed at the end of the year are sustainable in 2024.

Key trends in Plastics M&A in 2023 include:

• From a quarter perspective, deal volumes remained consistent through the first three quarters of the year, with an average quarterly deal volume of 89, which was in line with pre-pandemic quarterly averages. The fourth quarter of the year far exceeded these levels, posting 115 transactions as a turbulent macroeconomic environment stabilized and strategic buyer activity picked up.
• Plastics M&A activity in 2023 was driven by both strategic and financial buyers, which accounted for 52% and 48% of deals, respectively, and remained in line with 2022 levels from a mix standpoint. Add-on transactions fell by three deals year-over-year but continued to be well above pre-pandemic volume levels. The 114 add-on transactions recorded in 2023 were 37 deals above the 2016 – 2019 average of 77. Platform private equity transactions fell in 2022 but rebounded in 2023. 70 platform transactions were announced per PMCF’s research, which accounted for 38% of financial buyer activity
• 2023 deal volume was driven in part by deals between buyers and sellers based in foreign countries. In 2023, foreign transactions, or deals involving a buyer and seller based outside of the United States, accounted for over 46% of the deal volume, which was an increase of 12% year-over-year. Foreign plastics M&A activity levels were more in line with pre-pandemic levels in 2023 than in 2021 and 2022 when domestic buyers drove deal activity

The second half of the year was marked by stronger activity than the first, mainly resulting from high levels of transaction announcements in the final quarter of the year. Strategic buyers drove the quarter-over-quarter increase, while financial buyers remained steady throughout the year.

2023 ended the year in a much better position than 2022 as inflation steadied, interest rate increases subsided, and inventory levels normalized. Should these trends hold, plastics M&A activity may be able to sustain the strong end to 2023 in 2024.

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