Plastics M&A volume remained steady through Q4 2017, resulting in 359 total transactions for the year. Up 23 deals (or 7%) over 2016, the industry experienced its strongest year for M&A since 2012. Notably, both strategic buyers and private equity add-ons drove deal volumes higher, increasing by 16 and 11 transactions respectively over 2016.
Within global plastics, packaging M&A activity remains at elevated levels with 126 total transactions for the year, with growth driven primarily by consolidation within the rigid packaging and bottle segments. From a cross-border viewpoint, U.S.-based buyers had a decreasing role in global plastics M&A in 2017 due in part to the weakening of the U.S. dollar. Rebounding from a down year in 2016, the number of transactions involving foreign buyers increased to 229 deals, up 31 over 2016 and in-line with the 5-year historical average.
Key 2017 plastics M&A trends included the following:
- Average stock market valuations for publicly traded plastics and packaging companies increased by 1.1x, from 10.1x EV/EBITDA in Q4 2016 to 11.2x in Q4 2017
- The volume of building products deals increased significantly from 17 transactions in 2016 to 36 in 2017 as companies are seeking to capitalize on rising demand for new homes and remodeling
- On a sector basis, volume growth was driven by injection molding and resin / color & compounding activity, increasing by 12 and 6 transactions, respectively. This growth was partially offset by declines in film and sheet & thermoforming
- Transaction mix shifted in plastic packaging as flexible packaging transactions decreased by 6 deals in 2017 and rigid packaging activity increased by 3 deals year-over-year
Marquee transactions for Q4 2017 included the following:
- Crown Holdings’ (NYSE:CCK) acquisition of Signode Industrial Group for $3.9 billion
- Genstar Capital’s acquisition of Tekni-Plex for $1.5 billion
- Carlisle Companies’ (NYSE:CSL) acquisition of Accella Performance Materials Inc. for $670 million
- Berry’s (NYSE:BERY) acquisition of Clopay Plastic Products Company for $475 million
2017’s robust activity levels and valuations reflect a strong M&A environment for plastics and packaging and what is clearly a “seller’s market.” Pricing for plastics and packaging deals are at multi-year highs. We expect this trend to continue throughout 2018, with M&A activity driven by significant available capital, low cost of debt, and the large number of buyers seeking acquisitions to bolster organic growth. Shareholders within plastics and packaging should take note of these buyer dynamics and attractive valuations available in today’s M&A market, as well as the extended length of the current M&A cycle, if they are contemplating a potential exit in the near future.