2024 Plastics & Packaging M&A Outlook Report
Global M&A activity reached record-breaking levels in 2021, sustaining its momentum into the first half of 2022. A subsequent slowdown emerged during the latter half of 2022, and continued into 2023, with further decline observed, indicating a gradual normalization following the peak of pandemic-induced fluctuations. In 2023, the sector saw an 11% decline in M&A transactions compared to the previous year, causing the figures to fall below the 10-year average. The packaging segment witnessed a relatively mild decline of 5.6% compared to the industrial and raw materials segments that saw significant reductions of 14.3% and 12% respectively. Despite this downturn, the overall 2023 M&A activity remains above the long-term historical average. Looking ahead, Blaige projects a rebound in M&A activity, foreseeing a return to the 10-year average within the next two years. Blaige anticipates a revitalized growth trajectory, forecasting a 4.2% increase in 2024F and 6% increase in 2025F, led by significant growth in the packaging sector.
In 2023, there was a slight shift in M&A dynamics, marked by a rise in the share of strategically motivated deals to 80%, up from 74% in recent years. This was accompanied by an increase in acquisitions by strategic buyers from 51% to 55%. In contrast, private equity M&A activity witnessed a decline in 2023, with the share of financial platform deals dropping to 20%.
In 2023, the proportion of international participation in M&A deals, as opposed to domestic transactions, remained consistent with recent years. However, a notable trend toward globalization is evident, with international-only deals increasing from 40% in 2001 to 57% in 2023.
The plastics processing segments, as identified by Plastics News and analyzed by Blaige, constitute around 1,400 companies with a combined total sales of approximately $135 billion (averaging $96 million per company). Notably, 82% of these processors and converters have annual sales below $100 million, with 72% falling under the $50 million mark. As depicted in the figure, global consolidators, often referred to as "Mega Cap" companies, boasting annual sales exceeding $500 million, make up merely 4% of the total industry participants.
Since 2001, 78% of the top 50 companies in each of the six plastics and packaging segments analyzed in this report have been either eliminated or undergone changes in ownership. The table below illustrates the consolidation activity among these companies. Over the last two decades, 78% of these firms have been eliminated, sold, or experienced an ownership transition, marking a notable increase from the 59% reported a decade earlier. Specifically, 60% of these companies have been eliminated through consolidation, while 18% have sold a controlling interest while retaining their corporate identities. Blaige projects that consolidation in the plastics processing sector will reach 84% by 2025. Notably, the molding and flexible packaging segments have witnessed the highest level of consolidation, with significant mergers and acquisitions activity over the past two decades.
Despite the decline in private equity activity in 2023, the plastics and packaging sector remains attractive to financial investors. Over the past two decades, private equity involvement has surged, with financial participation in both platforms and add-ons increasing from 15% in 2001 to 40-50% in recent years. As private equity continues to grow, competition will intensify, putting pressure on smaller companies lacking an effective strategic plan. In 2023, middle-market private equity buyouts reached a high valuation of 11.0x EV/EBITDA. Companies that operate in resilient sectors with solid profit margins have consistently been able to maintain higher market valuations. There is a strong presence of excess capital, and sponsors have the chance to acquire assets at appealing prices. The amount of uninvested private equity capital in North America has increased by more than 5 times in the last 10 years, reaching $474 billion as of July 2023.
Blaige & Company / Blaige Industry Analytics, with offices in Miami and Chicago, is an investment bank and market intelligence expert dedicated exclusively to the packaging, plastics, and chemicals industries. The Blaige team has decades of transaction experience, has completed over 200 transactions, and has visited and evaluated over 600 packaging, plastics, and chemical operations all over the world. Last year Blaige celebrated its 20-year anniversary. Over the years, we have built a solid reputation as a trusted advisor, guiding clients through complex transactions and making a profound impact in the sector. Blaige is an active member of the Flexible Packaging Association (FPA), Contract Packaging Association (CPA), Western Plastics Association (WPA), Alexander Watson Associates (AWA), and others.
Complimentary M&A Consultation
As part of our commitment to industry excellence, we offer complimentary consultations to help you explore opportunities, navigate challenges, and make informed decisions in this dynamic landscape. We look forward to engaging with you in a no-obligation, confidential (NDA available) discussion of your strategy and vision. Whether you are considering an unsolicited offer from a buyer, starting a sale process, or making an offer to acquire, now it is time to take action. We are well-prepared to assist you in evaluating your options and navigating these dynamic market conditions.
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