Plastics M&A Pulse – H1 2019

Plastics and Packaging M&A activity grew 3% during the first half of the year to 169 deals, a level PMCF believes is a good indicator for another strong year of M&A activity of 300+ transactions. The slight increase in deals was driven by a resurgence of strategic buyer activity and offset by lower private equity platform investment. The share of total Plastics & Packaging M&A transactions completed by strategic buyers increased to 56% in H1 2019 compared to 46% in H1 2018. The number of private equity add-on transactions also increased while platform private equity transactions declined. The data is showing a shift by selling shareholders back to buyers with a strategic angle vs platform private equity which is likely due to higher prices, but can also be attributable to other factors based on PMCF’s experience.

Other key trends in the first half of 2019 Plastics and Packaging M&A activity include:

• Transaction multiples experienced a slight uptick from record levels experienced in 2018 further supporting the current “sellers” market. There continues to be a high level of competition for high quality plastics companies with more buyers interested than available sellers
• Injection Molding continues to represent the largest segment in global plastics & packaging M&A transactions. The number of transactions in injection molding was up 25% in the first half 2019 driven by increases with both strategic and private equity add-on acquirers
• Global Plastic Packaging M&A activity experienced a ~13% decline during the first half, driven primarily by a decrease in activity in the Industrial and Consumer end markets. Partially offsetting these declines was growth in the number transactions with packaging companies operating in the Food & Beverage and Medical end markets (both appear to remain highly attractive areas of focus for strategic and financial buyers). PMCF is closely monitoring M&A impact of increased public focus on reducing single-use plastic packaging
• From a geographic perspective, plastics M&A transaction volume in the U.S. and foreign countries was relatively consistent compared to H1 2018 with a small shift in cross border transactions. Based on the recently implemented tariffs and some of the global trade issues, we expect to see an increase in Foreign-to-US transactions in the coming months

Although the Global M&A market for Plastics and Packaging has remained strong, there are causes for concern including global trade tensions, slower economic growth, negative press regarding plastic waste, and the prolonged length of the current M&A cycle. While these topics pose some uncertainty, PMCF expects M&A to remain strong and believes the majority of buyers will continue to seek inorganic growth through acquisitions in the plastics industry.