Packaging M&A update: Q2 2017
Increased demand spurs investment in petrochemical projects, as well as boxes and other protective packaging for e-commerce applications. At the same time, many packaging companies are striving to achieve preferred vendor status among their customers, while private equity groups are investing in the molding industry at record levels. This Packaging M&A update provides Deloitte Corporate Finance LLC insights and market data analysis that shed light on M&A trends in the Packaging industry.
- Scale drives margins1: Customers are reducing the number of vendors they work with from 50 to 10, on average, in order to realize purchasing efficiencies. The emphasis on becoming a preferred vendor is increasing as the industry continues to consolidate.
- Growing PE interest in molders2: Private equity investment in the molding industry is at a record high. Noteworthy acquisitions and recapitalizations in 2017 include: R&D Molders, Xcentric Mold, Richardson Molding, Dutchland Plastics, Plastic Components, and Pexco (among others).
- Investment in the petrochemicals industry to drive long-term growth3: With $185 billion in new US petrochemical projects in construction or planning, a surge in plastics resin capacity is expected to come online in the near future. Suppliers are ramping up to accommodate a large scale increase in packaging demand, especially in emerging markets such as Brazil and Mexico.
- E-commerce to drive significant growth in paper packaging/boxes4: Demand for boxes and other protective packaging for e-commerce applications is projected to grow more than 10 percent each year to $1.1 billion by 2020, driven by continued, robust growth of online retail.
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1 “CFOs face plenty of challenges in 2017,” Plastics News. June 29, 2017.
2 “Weighing the benefits of private equity ownership,” Plastics News. June 11, 2017.
3 “The Shale Revolution’s Staggering Impact in Just One Word: Plastics,” The Wall Street Journal. June 25, 2017.
4 “Market for Boxes Used in E-Commerce to Grow 10 percent Annually Through 2020,” Plastics News. Dec 08, 2017.