Global Plastics M&A produced a strong year in 2022, despite reporting a 25% decrease in volume when compared to elevated 2021 levels. Transaction activity of 363 deals remained above pre-pandemic average yearly volume levels. 2022 started strong as favorable market conditions carried over from 2021, but deal activity slowed as the year progressed. In the second half of 2022, Global Plastics M&A faced numerous headwinds including (1) high levels of inflation, (2) rising interest rates and challenging debt markets, (3) macroeconomic uncertainty, and (4) slowing demand. Overall, 2022 was a tale of two halves, but Global Plastics M&A recorded the 4th highest level of deal volumes since 2005.
Key trends in Plastics M&A in 2022 include:
- Plastics deal volume started strong in Q1 2022, recording 13 more deals than the same quarter in 2021. Q2 and Q3 of 2022 recorded 91 and 92 transactions, which was above pre-pandemic quarterly transaction volumes. In Q4, the market felt the effect of macroeconomic headwinds, and transaction volume fell to 66. Despite lower levels of activity in Q4, monthly deal volume in the year was relatively on par with the pre-pandemic average monthly deal volume
- Private equity was a major catalyst in this year’s activity levels, increasing market share of overall transactions from 47% in 2021 to 49% in 2022. The total number of private equity transactions, however, fell by 51 deals, from 228 to 177
- The Specialty Plastic subsector, which includes foam, composite, distribution, machinery and more, was the only plastic subsector to increase year-over-year and led all subsectors in transaction volume with 126 deals. All other subsectors regressed from the historic activity levels witnessed in 2021, but remained in line or above pre-pandemic volumes
- All plastic end markets, excluding the Medical and Construction end markets, declined year-over-year. Decreasing deal volumes in H2 2022 were partially driven by a drop off in plastic Food & Beverage transactions
- Domestic M&A increased market share of overall transactions to 45%, the highest percentage of total deal activity recorded since PMCF began tracking Global Plastics M&A activity. Foreign M&A activity fell by 70 transactions year-over-year; the pullback may be attributable to a mix of increased geopolitical tensions, rising inflation rates, and global macroeconomic uncertainty
Overall, Global Plastics M&A transaction activity posted a strong year in 2022, when compared to pre-pandemic levels. The big question is whether or not the current slowdown in deal-making will continue into 2023. With that being said, the fundamentals remain strong, and buyers of plastics businesses, including private equity, appear to still be motivated to complete transactions. PMCF will be closely monitoring the development of market headwinds throughout the year and the effects these factors will have on plastics M&A in 2023.