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Plastics and packaging mergers and acquisitions (M&As) continue to be on a roll. Following a strong finish in 2013, transactions in Q1 2014 matched the volume of Q4 2013, reports the M&A Quarterly - Plastics & Packaging, published by middle-market investment firm P&M Corporate Finance (PMCF).

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Plastics and packaging M&As have a good quarter

Plastics and packaging mergers and acquisitions (M&As) continue to be on a roll. Following a strong finish in 2013, transactions in Q1 2014 matched the volume of Q4 2013, reports the M&A Quarterly - Plastics & Packaging, published by middle-market investment firm P&M Corporate Finance (PMCF). With a year-on-year M&A increase of 25 deals and a total of 92 transactions, Q1 2014 was "the second consecutive quarter of deal flow above the quarterly average from the past three years, and the fourth consecutive quarter where activity remained flat or increased," says the report.

Robust M&A activity has been helped by relatively stable economic indicators coming from North America, Europe, and Asia. Combined with attractive conditions in the equity markets, low-interest loans, and flush capital and cash reserves, the outlook for the plastics and packaging sectors is largely positive, notes the report, adding that M&A activity in 2014 holds the potential for a continued flow of deals.

Here are some Q1 2014 highlights from the report summary:

  • Strategic buyers are the most active segment, accounting for nearly 70% of transactions.

  • Injection molding and resin & compounding deals experienced the largest growth, up by 9 and 7 transactions, respectively.

  • Packaging deals accounted for approximately 25% of transactions.

  • Custom molding and industrial plastics M&A had the largest year-on-year growth.

  • PMCF's index of publicly traded plastic and packaging companies slightly outperformed the S&P 500.

With the exception of the more consolidated segments, such as blow molded packaging, most plastic packaging sectors with small to midsize suppliers may be looking at shareholder exits, says the report. "With the current favorable multiples for attractive businesses in mind," writes PMCF, "we believe these conditions will likely continue to drive seller volume in the near future."

Q1 2014 segment trends

While year-on-year plastic packaging M&As declined by 12% in Q1 2014, private equity deals were flat (eight transactions). Slight growth was reported in the food and beverage and consumer packaging sectors, while industrial, medical, and electronics packaging were down.

Transactions involving injection molders increased by 50% (nine deals), fueled mostly by buyer activity in the automotive, consumer, and electronics markets. Foreign M&A activity registered the strongest year-on-year growth. This period saw the Berry Plastics acquisition of the healthcare containers and closures division from Rexam plc for $135 million, as reported in PlasticsToday.

Plastic film and sheet and thermoforming M&As remained flat in the first quarter of 2014, while resin suppliers and color & compounding companies saw a 58% increase and blow molders posted a 60% increase in M&A activity, the latter driven by food and beverage, industrial, and consumer markets.

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