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Packaging M&As: Not much chance of a slowdown to 2020

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Edited by Mark A. Spaulding 
 
The multi-year boom in packaging mergers and acquisitions (M&As) continued in 2018, and there’s not much chance of slowdown ahead, says the Packaging Perspectives newsletter from Mesirow Financial.
 
Consistent with previous years, this growth is attributed to the familiar macroeconomic drivers of consolidation, including low interest rates, readily available credit, strategic acquirers looking for growth and aggressive private-equity (PE) buyers attracted to the industry’s fundamentals, Mesirow says.
 
While these factors are important to note, the most interesting aspect of the ongoing packaging M&A boom becomes evident when taking a closer look at the deal participants. Among the major acquirers are Hood Container Corp., WestRock Co., Packaging Corp. of America, Welch Packaging, ProAmpac, Novolex, TC Transcontinental, PPC Flexible Packaging, Resource Label Group, and Fortis Solutions.
 
The packaging field has undergone a transformative consolidation due to pervasive merger activity by both strategic and financial buyers. Successful use of M&As last year helped strategic acquirers accomplish business objectives and helped private-equity acquirers build businesses with impressive scale and scope. However, deal participants have varied significantly between industry sectors, Mesirow explains.
 
Recently, corrugated-packaging transactions have been dominated by strategic acquirers without private-equity backing. This is not the case with flexible packaging and labeling where PE acquirers have had great success finding entry points and building significant businesses. Both industries are significantly less concentrated than corrugated and upstream integration is a more limited economic consideration, Mesirow says.
 
Overall, 2018 saw its fair share of blockbuster deals. Among them are WestRock buying Kapstone for $5 billion; TC Transcontinental acquiring Coveris for $1.3 billion; Amcor purchasing Bemis Co. for $6.8 billion; and Greif buying Caraustar for $1.8 billion.
 
What’s ahead for 2019
While the factors contributing to a strong deal-making environment remain, two macroeconomic factors that may someday provide a headwind to M&A activity. These include a decline in global trade since 2014, and a rise in net debt over the past decade. Until then, Mesirow says, there is no reason to believe the packaging M&A boom will not continue.

Read more: Packaging M&As: Not much chance of a slowdown to 2020


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