Global Plastics M&A volume set record levels in 2021; the industry recorded 485 transactions which was an increase of 70% year-over-year and the first year with over 400 transactions since PMCF began tracking M&A in the industry 15 years ago. This increase is largely attributable to (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 Plastics M&A in 2021 include:
- Plastics deal volume started increasing in Q4 2020 and steadily climbed throughout 2021, peaking at 147 transactions in Q4 2021. Each quarter in 2021 marked a new record level of M&A activity over the past 10 years. Monthly deal volume was relatively consistent through Q2 and Q3 2021, averaging 40 transactions per month. In Q4 2021, monthly activity experienced a significant uptick as a record number of plastics transactions moved into the final phases with the primary objective of closing by year-end
- All plastics end-markets, subsectors, and product segments increased compared to 2020. Industrial transactions led all other plastics end-markets with 203 transactions globally and was the primary driver for the large increase in plastics transactions in Q4 2021. M&A involving plastic packaging companies nearly doubled despite renewed concerns over sustainability and significant discussions around ESG. Flexible Packaging was a key driver of the increase in plastic packaging, reporting the highest level of activity in over 10 years
- Private equity was a major factor in the record level of activity in 2021, nearly doubling the number of plastics transactions completed in 2020 and increasing market share of overall transactions from 41% in 2020 to 47% in 2021.
- Domestic M&A accounted for 42% of total deal volume, or 205 transactions, as U.S. financial and strategic buyers proved to be highly active in the plastics M&A market. Despite global macroeconomic headwinds caused by the Coronavirus pandemic and related supply chain issues, cross-border transactions totaled 73 deals in 2021 which represented a 74% increase over 2020 levels
Overall, Global Plastics M&A transaction volume notched its best year ever by a wide margin in 2021. The big question is whether or not this momentum will continue into 2022. Given the number of carryover transactions due to COVID from 2020 and the acceleration of plastics transactions for tax reasons, we do not expect to see this same level of record activity in plastics in 2022. That said, the fundamentals remain strong and buyers of plastics businesses, including private equity, do not appear to be pulling back any time soon. The availability of sellers to meet buyer demand is more of the issue. We are also closely monitoring potential macroeconomic issues such as inflation and rising interest rates that could impact the favorable environment that currently exists for plastics M&A.