M&A —Polischuk
During the last several years, the packaging sector has experienced a substantial number of mergers and acquisitions (M&A). As a matter of fact, at the Flexible Packaging Association (FPA) annual meeting held earlier this month, Doug Lawson, managing director, packaging group for BMO Capital Markets, reported that the industry set a record in 2007 with 386 announced worldwide transactions.
Several factors drove this record activity, including a strong rationale for mergers, strong economies, and good capital markets. The net result, reported Lawson, was a median EV/EBITDA (enterprise value/earnings before interest, taxes, depreciation, and amortization) multiple of 7.4x.
Many of these mergers and acquisitions were reported in the pages of packagePRINTING and included some of our industry’s more recognizable names. Transactions featured: YORK Label’s acquisitions of LSK Label, Cameo Crafts, and Package Services Co.; the merger of Graphic Packaging Corp. and Altivity Packaging; Ampac Packaging’s purchases of Mohawk Northern Plastics and the Trigon Security Products business of Sealed Air Corp.; Fort Dearborn’s acquisition of Renaissance Mark; the merger of Resource LabelGroup and Mid-South Graphics; WS Packaging’s purchase of SenecaSalem; Alcoa’s sale of its packaging and consumer businesses to Rank Group; and most recently, Multi-Color’s acquisition of Collotype.
Today, however, the economic environment for M&A activities has changed. The U.S. economy has slowed appreciably and the capital markets are experiencing a serious credit crunch (spelled sub-prime). Although these factors alone will be enough to slow M&A activity in the coming months, Lawson still believes there is “compelling rationale” for additional consolidation in the packaging industry. Some of the factors for this continued M&A activity include high fragmentation in various sectors, economies of scale, and geographic expansion, which he believes will be more and more of a factor.
In our annual State of the Industry Report starting on p. 46, Corey Reardon, president and CEO of AWA Alexander Watson Associates, notes one reason for further consolidation. “Package printers and converters remain resolutely smaller entities—many of them, especially in the label business, ‘mom-and-pop’ operations,” he says. “The high number of companies in the market, and the lack of consolidation at this level, makes some fallout inevitable.”
If a merger or acquisition for your company is in the foreseeable future, be sure to read the advice offered by several M&A experts starting on p. 43.
We welcome your comments regarding any part of packagePRINTING. They can be addressed to Editor, packagePRINTING, 1500 Spring Garden St., 12th Floor, Philadelphia, PA 19130, or to tpolischuk@napco.com.
