Nick Mockett of Moorgate Capital joins the guest bloggers at the Packaging Federation, here casting an overview over some Merger and Acquisition activities and trends thus far this year.
The year 2015 was such a bumper year for M&A activity in the packaging sector that this year’s figures were always set to struggle by comparison. 2015 saw over US$35bn of deals whereas halfway through 2016 the corresponding figures were around $10bn.
Nonetheless, given the relatively modest economic growth throughout Europe, and the ongoing Brexit limbo, substantial deals have been done and substantial interest in European packaging – from both inside and outside the continent – remains.
Many North American companies are maintaining a very active watching brief. Europe’s packaging businesses are seen as stable, compared with the alternative of Emerging Markets.
Asia also shows no lessening of an appetite for possible acquisition activity in Europe. Slowing domestic markets there provide one reason. A continuing trend for Asian FMCG companies to buy established brands provides another clue.
The packaging sector is not necessarily in the forefront of this East-West movement but where brands and retailers go, for example, other sectors will follow. One of the Asian businesses we are currently working with, for example, is currently seeking to deploy €5bn in European Packaging.
Packaging businesses strong on innovation in materials and technology are able to increase IP and process know-how which can be leveraged through acquisition.
Plastic packaging, for example, is a case in point; making up about 50% of all packaging M&A each year globally. In Europe, for example, RPC Group, the leading player in rigid plastics, and traditionally strong in injection moulding technology, has continued to acquire rigid plastics businesses, such as Global Closures for €650m.
RPC also lately acquired British Polythene Industries for approximately £300m. BPI is a European leader in blown film technology – PE film that is converted into packaging and also number one in agricultural films such as silage wrap. This marks RPC’s first acquisition within the flexibles supply chain. Another deal Moorgate Capital is advising on in flexibles, again at the €300m plus level, is expected to complete in 2016.
Therefore, this will have been one of the most active years in European flexible packaging M&A. This reflects the fact that flexibles are a high growth segment and there is plenty of opportunity for innovation and differentiation which generally means superior returns.
As we head into Q4 2016 therefore, the year has already shown a fair few purple patches with enough evidence also to point to a European packaging sector that remains attractive to investors, and with the promise of significant trades to come.