There are several themes that are dominating today's mergers and acquisition (M&A) marketplace. The most prevalent theme is the use of M&A to expand the global footprint of the buyer. Packaging companies are finding it easier to buy their way into geographic expansion rather than build their way. Chart 1 highlights some recent M&A activity that has resulted in significant geographic expansion for the acquirer.
It is interesting to note that the majority of the global expansion transactions took place in emerging markets. Most of the buyers are publicly held businesses, and as such, must find ways to grow. Emerging markets are experiencing significant increases in consumer purchasing power, and consequently, are attractive to consumer packaged goods providers and their packaging suppliers.
A second major theme in the packaging M&A marketplace is the use of acquisitions to advance the tactical corporate objectives of the buyer. These transactions have been the bread-and-butter of the M&A marketplace. Buyers have been able to expand product lines, develop economies of scale, and fill-in geographic capabilities by usng M&A. Chart 2 outlines recent transactions that illustrate this trend.
The purchasers using M&A to further corporate objectives cut across several types of ownership structures. Some of the buyers are public (RockTenn, PCA, PolyOne); some are backed by private equity groups (Packaging Dynamics, WS Packaging); and some are privately held (Menasha). However, all are using M&A to grow revenues, improve profitability, and expand capabilities.
A third major acquisition theme seen in the packaging marketplace is the continued active role of private equity. In general, the private equity marketplace today is very different than it was before the financial crisis. Prior to the financial crisis it was not unusual to see multi-billion dollar private equity-led transactions across all industries, including packaging. Today, private equity still plays a very active role in packaging, but usually on a somewhat smaller scale. Chart 3 briefly profiles some significant private equity-backed participants in the general package printing sector. Most of these companies have been quite acquisitive over the years.