Packaging M&A (Cont’d from Page 5)
the expected annual growth rate of 14.3 percent in the e-commerce packaging market through 2022, corrugat- ed packaging is well-positioned for continued growth. Flexible Packaging The flexible packaging sector continued its strong growth trajectory in the first half of 2019 mainly due to increased technological advancements as well as conve- nience and customization efforts, making flexible pack- aging preferable to more consumer products than they were historically. M&A activity within the flexible pack- aging sector to date in 2019 has proven that the large in- dustry participants are willing and able to pay premiums for the industry’s niche companies in order to broaden capabilities and expand product offerings and geograph- ic reach. While large acquisitions, such as Amcor’s June purchase of Bemis Company, grab headlines, private equi- ty-backed flexible packaging companies are driving deal volume (see Table 2). C-P Flexible Packaging, PPC Flexi- ble Packaging and ProAmpac, all private equity-backed, are actively pursuing buy-and-build strategies. Relative to the other forms of packaging, flexible may have the most growth potential due to the value it adds in reducing food waste, extending shelf life and decreasing shipping costs. Rigid Plastics Rigid plastics continue to be a driver for the overall packaging materials sector as a result of their ability to remain cost-effective, lightweight and recyclable. Rigid plastics have benefited from the rise in demand for bioplastics in an effort to reduce carbon footprints while maintaining a durable, quality packaging option. Consolidation has become more prevalent in this sec- tor as investors are drawn to the consistent cash flows stemming from the rise in packaged and canned food consumption. The largest M&A deal in the first half of 2019 came from the rigid sector and included U.S.- based Berry Global Group and Europe’s largest plas- tic packaging company, RPC Group. The transaction boasted an enterprise value of $5.8 billion and repre- sented an EBITDA multiple of 7.6x. This transaction, like others in the sector, is an effort to take advantage of a fragmented global plastics market (see Table 4). Overall, 1H 2019 has seen increased deal volumes and premiums being paid by both strategic and pri- vate equity acquirers in an effort to consolidate core businesses and diversify product offerings. Outlook Heading into the second half of 2019, concerns over a potential market correction remain; however, ambi-
(Cont’d on Page 12)
Flexo Market News September 2, 2019 11
www.nvpublications.com
Made with FlippingBook - Online catalogs