The Global Packaging M&A market rebounded in 2021 as effects of the Coronavirus pandemic wore off and unique market conditions paved the way for significant transaction activity. Transaction levels exceeded 350 deals for the first time since PMCF began tracking the industry. In total, 359 packaging deals were announced or completed in 2021 which was a 53% increase over 2020 levels and higher by 43 transactions than the next highest year since PMCF began covering the sector. The record deal activity could be attributed to several unique factors including (1) carryover transactions from 2020 that were delayed due to COVID, (2) continuation of strong “sellers’ market” conditions, (3) favorable market conditions for buyers including low interest rates, high debt availability, and large cash reserves, and (4) acceleration of transactions by sellers due to concerns over increases in capital gains taxes.
Key trends in Packaging M&A in 2021 include:
- Packaging deal volume remained relatively constant through the first three quarters of the year, averaging 28 transactions per month. The fourth quarter of 2021 was the highest quarter from a deal volume perspective in the last 10 years with 104 deals announced or completed. Overall, monthly deal volume was relatively consistent leading to a very strong year for the Global Packaging M&A market
- All packaging subsectors including rigid and flexible plastic packaging, paper packaging, and other packaging rose year-over-year with flexible plastic packaging transaction volume increasing 129% which was the most of all the subsectors. Rigid plastic packaging was the only packaging subsector not to record the highest annual total from a transaction volume standpoint in the last 10 years
- Increased transaction activity can be attributed to robust participation from both strategic and financial buyers which accounted for roughly an equal split of transaction volume. Private equity buyers increased their activity after a down year in 2020, accounting for 181 transactions, up from 106 deals last year
- Transaction multiples remain high in the packaging space. The average of PMCF’s proprietary research on EV/EBITDA multiples has remained above 9x since 2017. Higher deal multiples point towards the activity within the industry and the premiums buyers are willing to pay to achieve consolidation
Overall, Global Packaging M&A achieved an unprecedented level of transaction activity. The robust activity points to unique circumstances experienced in the post-pandemic market as well as trends in the industry which point to elevated levels of consolidation. Transaction activity will most likely not continue at this pace throughout 2022 as interest rates normalize, the tax environment settles down, and the macroeconomic environment cools. However, packaging businesses remain highly attractive to both strategic and financial buyers and multiples continue to be elevated. It remains to be seen if sellers can match the demand of such an active buyer base in the current environment.