industry insight, financeSince the Great Recession ended, we have witnessed a robust and active mergers-and-acquisitions environment in the flexible packaging industry, both domestically and internationally. The strong environment can be attributed to:

  • Increasingly challenging customer demands
  • Corporations seeking multiple avenues for growth
  • Inexpensive and abundant acquisition financing alternatives
  • Well-funded, aggressive private equity firms

While these insights are not necessarily new to the industry, they lay the groundwork for trying to predict the future trends in M&A in the flexible packaging industry. There are three prevailing forces at work that provide some insight into what the future may hold.

Primarily, private equity activity will continue – if not accelerate – maintaining lofty valuations.  In 2013, private-equity firms in the United States raised $216 billion, an increase of 15 percent over 2012’s fundraising efforts.  As of the end of 2013, more than $400 billion in finite-lived private-equity capital stood ready to be invested, which equates to roughly $1 trillion of total buying power. The flexible packaging industry has seen many well-known private equity-backed platforms including Ampac (Falcon), C-P Flexible Packaging (First Atlantic) and Prolamina (Wellspring), among others.  In 2013, many notable private equity-backed flexible packaging acquisitions included the Jordan Co.’s acquisition of Transilwrap, American Securities’ acquisition of Tekni-Plex and Cove Point’s acquisition of Bemis’ Clysar division.  Today, there is a great market imbalance between the amount of both debt and equity capital looking for acquisition opportunities and the comparatively smaller number of companies for sale, driving valuations upward.

Packaging companies may use M&A to broaden their product offerings beyond their core capabilities and markets. A recent example of this is the merger between Multi Packaging Solutions and Chesapeake.  The combined company will now offer a wide range of packaging solutions (labels, plastic packaging and folding cartons) to the healthcare, consumer and entertainment markets, among others.  It would not be surprising to see similar M&A transactions that interweave packaging solutions for multiple end markets. Potential areas for synergistic combinations could include companies in flexible packaging, fulfillment, contract manufacturing, corrugated, rigid packaging and other substrates.  In many cases, companies that provide more diversified offerings increase their standing, importance and relevance to those customers in an era when customers are constantly evaluating and rationalizing their supplier base.

Flexible packaging companies will continue to pursue M&A to expand their presence in developing countries.  While the U.S. economy is steady and improving, gross domestic product growth remains slow by comparison to India, China and Latin America. A recent example of this type of transaction is Berry’s January 2014 acquisition of Qingdao P&B Co. Ltd., a producer of plastic packaging and personal care products for the Chinese market.  Berry has a stated interest in strategic growth in developing countries. With this acquisition, Berry is well positioned to offer its range of products to the Chinese market.  It would not be surprising to see more of this activity in the industry.

Finally, we see other factors that will continue to drive M&A in the flexible packaging industry.  Smaller, regional companies may consider teaming up with larger entities through M&A to better serve their customers on a wider geographic scale, with additional products or newer technologies that some of the larger enterprises have. Such combinations are also likely to enjoy operational and purchasing synergies.


Mesirow Financial Inc.