Multiple Forces Continues to Drive Broad-Based M&A Interest in Packaging Industry

Shift toward flexible packaging continues as shippers look to reduce weight and consumers demand more convenient, resealable options.

Monday, October 23, 2017

In 2016, M&A activity in the packaging industry grew to a record $41.9 billion, the third consecutive year that transaction value significantly exceeded the 13-year median of $24.5 billion. Deal value in 2016 was driven by a large number of $750 million-plus transactions. This heightened level of deal-making continued in the first half of 2017, as transaction value in the first six months of the year was up 15% on a year-over-year basis due to transactions such as Advent International’s acquisition of Faerch Plast, Multi-Color’s acquisition of Constantia Labels, and Leonard Green & Partners’ and Oak Hill’s acquisition of Charter NEX Films.

Several trends are converging to drive M&A activity in the packaging industry. Based on the view that we may be entering the mid-to-late innings of the current economic expansion, financial sponsors are focusing aggressively on the packaging sector due to the industry’s relatively noncyclical nature and ability to generate consistent and predictable cash flow. Publicly traded strategic acquirers are pursuing acquisitions to generate growth to justify valuation multiples that have expanded significantly over the last several years.

This broad-based interest is being further supported by highly accommodative debt markets, leading to heightened valuations in the first half of 2017. During the first six months of 2017, the median EV/LTM EBITDA multiple in packaging transactions increased to nearly 9.0x, well above the median of 8.3x since 2004.

Highlights include:

  • Relatively low cyclicality of the packaging sector driving financial-sponsor interest
  • Strategic acquirers seek growth to justify public valuations
  • Debt markets continue to view packaging favorably
  • Flexibles segment generating accelerated growth opportunities for packaging companies

Packaging-Annual-Report-2017



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