State of the Industry: Global Consolidation in Packaging

Tom Blaige, chairman/CEO of Blaige & Company, highlights the continuing consolidation trend impacting the packaging arena.

As we move into the next decade, many changes are in store for owners of packaging companies. Through direct involvement in mergers and acquisitions (M&A) for more than 25 years, and using comprehensive proprietary research, Blaige & Company has witnessed the evolutionary trends of industry structures and transaction processes. Blaige & Company's new detailed Ten Year Consolidation Analysis (released February 2011) of the major packaging sectors shows that during the past decade, more than half of each segment's top 50 companies as of 2001 have undergone elimination or a change in ownership. Additionally, on average, 20 percent of surviving companies used M&A as a strategy, raising the total percentage of companies substantially involved in M&A over the past decade to 70 percent. As this consolidation trend continues, owners of packaging companies will need to develop more institutionalized strategies to continue growth or to ensure survival.

Today, packaging remains one of the largest manufacturing industries in the U.S. with greater than average fragmentation. In the past decade, the speed of consolidation has been significant and the effects have deeply impacted all industry participants. In recent years, transaction volume has been dominated by plastic and fiber-based packaging.

In fact, Blaige & Company has analyzed 1,592 deals in the packaging industry since 2002. Plastic packaging companies accounted for 69 percent of these transactions, while 28 percent were primarily made up of fiber-based packaging. Metal and glass sectors account for the remaining 3 percent of transactions since 2002.

The significantly higher activity levels in plastic and fiber packaging correlate directly with their relative levels of fragmentation. Only a few dominant companies remain in the highly consolidated metal and glass packaging markets. Blaige & Company expects consolidation in the plastic and fiber packaging segments to continue at a strong pace, which will have profound and far-reaching implications for business owners of all types and sizes of packaging companies.

2010 market overview

2010 marked a record year for the packaging sector, with deal volume reaching nearly 250 transactions. Packaging deal volume has nearly tripled during the past decade, with plastic packaging reaching an all-time high of 159 transactions and fiber reaching a high of 80 in 2010.

Plastic packaging—Accounting for nearly 30 percent of all plastics transactions, plastic packaging consolidation has had a significant impact on the overall plastics industry as leaders adopt more sophisticated M&A strategies to drive growth. During the past ten years, the volume of plastic packaging transactions averaged 113 transactions annually, and increased from 28 in 2001 to 159 in 2010. Two of the key drivers behind this rapid consolidation are a significant globalization trend and increased private equity involvement.

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