Schaumburg, Ill. — The plastics M&A market remains strong, even as top-performing firms are distancing themselves from the pack.
“There’s a gulf occurring between the haves and the have nots, the large caps vs. small caps,” market veteran Thomas Blaige said May 21 at the Plastics News Financial Summit in Schaumburg.
“Deal volume is way up, but we might be at a peak in terms of multiples paid,” he added. “If you don’t have the right metrics, don’t look for 10 times [earnings before interest, taxes, depreciation and amortization] when selling your firm. That’s not realistic all the time, unless you’ve got really good growth margins and market positions.”
Blaige, chairman, CEO and managing partner of Blaige & Co. LLC in Chicago, said that plastics deal volumes essentially doubled between 2001-18, with the number of plastics packaging deals tripling in that span.
The percentage of plastics deals that involved financial investors increased from 15 percent in 2001 to 57 percent last year, according to Blaige. The share of plastics deals in which one financial investor sold to another grew from 10 percent to 22 percent.
Blaige also pointed out that many plastics processing firms remain modest in size. Of the approximately 1,500 firms in the Plastics News annual rankings, he said, almost 75 percent have annual sales of less than $50 million.
Consolidation also has played a major role in plastics M&A, Blaige added, with almost 70 percent of major processors going through mergers or sales in the 2001-18 period.
With this data in mind, Blaige offered strategies for firms “to keep from becoming a victim.” These methods included looking at initial pubic offerings or becoming part of a private equity platform or add-on.
Taking on a PE firm as a minority investor is also an option for plastics firms, but Blaige said that sometimes in those cases, a minority PE investor “can be a ball and chain.”
“You need to create options for yourself,” he added. “Prepare in advance. Don’t wait until you’re ready to retire.
“Take actions to create the most appeal for your firm,” Blaige said. “You need to know all of your financial info and be able to explain why you’re going to be a leader in your market.”
Blaige founded his own firm in 2003 and has more than 30 years of M&A experience overall. During that time, he and his team have completed more than 200 transactions.
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