Packaging market 1st half of 2019:
M&A deals down – above-average in Europe
The number of worldwide M&A transactions in the packaging industry declined by 21 to 126 in the first half of 2019 (prior year period:159). In Europe the decline was down 35 to 40 transactions in the same period, in North America only 9 to 41 deals.
A characteristic for the indication of the corporate attractiveness is the multiple for EV/LTM EBITDA (Equity value/last 12 months EBITDA). In 2015, the multiple value was still at an average of 7.5; even increased to 13.0 by the third quarter of 2018. Since then, the value was only 9.3 in 2.Q 2019. Depending on the industry, multiples can however, fluctuate. It also plays a role whether a strategic or a financial investor shows interest in an M&A deal. The multipliers can only be transferred to a limited extend to small and medium-sized or crisis companies due to the size differences, company situation and margins
Political and economic uncertainties dampen M&A mood
The decline in transactions in Europe are likely to also be caused by the global political situation and economic uncertainties (e.g. BREXIT or/and US trade barriers). But also the topic of plastics and the environment, as well as a impending recession will now play a role (the plastics packaging industry has been the main industry in the transactions).
Outlook
Private equity floats in money. Large investors such as insurance companies and pension funds are looking for alternatives to the low interest rates and are increasingly encountering over-the-counter company shareholdings. Strengthening the strategic portfolio positions of individual companies will also continue to be managed through acquisitions, so that overall, with, albeit weakened in the medium term with increasing M&A activities is to be expected. In particular, the packaging segments such as “Active and Intelligent Packaging”, “Bio-Plastics”, “Biodegradable Packaging”, “Smart Labels” or “Anti-Counterfeiting Packaging” will be of increasing interest.
Further information on M&A/Due Diligence for the packaging industry can be requested at info@new-business-consulting.com.
