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September 2017 Packaging Products Sector MARKET OVERVIEW
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September 2017
Packaging Products SectorMARKET OVERVIEW
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Packaging Products Sector
INDUSTRY DYNAMICS • Packaging markets growth trends are quite stable touching many end markets
and selling into consumer-oriented markets
• Healthcare/hygiene markets have been achieving attractive growth levels driven by overall population growth; an aging population demanding products with a high content of nonwoven materials; and disposable products driven by the increase of health standards
• US food & beverage packaging continues to grow albeit at decelerating growth rates as younger consumers shift to fresh foods away from packaged products and carbonated soft drinks; Global exposure to food & beverage has offset the US volume challenges
• Commodity/raw material cost pass-through capabilities can affect margin realization
M&A ACTIVITY • Significant consolidation throughout as largest players look to aggressively
deepen product and geographic diversification while concurrently raw ma-terials purchasing power
– North American M&A activity has increased significantly over the last 3 years to 60% of global M&A activity
– Berry has made 40+ acquisitions over last 30 years, 10 over the last 7 years, with AEP Industries (2017) and Avintiv (2015) as the most recent are the largest in Berry’s history
• Private Equity has played a significant role in rolling up more fragmented pieces of the market as well as the stability of topline and margins are attrac-tive assets to leverage
– Berry, Berlin, and TricorBraun are notable PE-backed roll-up platforms
VALUATION TRENDS • Given general stability of industry growth and solid margins, packaging compa-
nies have been viewed as defensive plays for the most part yet have garnered attractive valuation levels in the public markets trading near 10.0x NTM EBITDA, well through 10-year cycle average of 7.4x
• M&A market multiples have been attractive over the years averaging 9.0x to 10.0x EBITDA multiples where exposure to higher growth substrates / end markets have achieved premium multiples
Packing Product M&A Market Continues to be Robust where Growth and Scale Continue to Trade at Premiums
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Global Packaging Products M&A Activity
Public Company Historical Trading Multiple Performance
Substrate Sector Growth Rewarded by Premium Multiples
4.8% 4.8%
4.0% 4.0%
2.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Flexible Plastic Rigid Plastic Paper Glass Metal
$9.6 $7.3 $7.0 $10.3 $15.2
$5.8 $6.0 $4.0 $17.5
$9.4 $6.0
$8.3 $3.2 $5.8
$7.8 $5.9
$6.2 $6.7 $11.3
$17.0
$4.8 $3.6
$17.9
$10.5 $12.8
$18.1 $21.1
$12.0 $12.6 $15.4
$34.4
$14.2 $9.5
0%
20%
40%
60%
80%
100%
$-
$10
$20
$30
$40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Nort
h Am
eric
an V
olum
e (%
)
Volu
me
($Bn
)
North America International Total North American % of Volume
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2007
2007
2007
2008
2008
2008
2009
2009
2009
2010
2010
2010
2011
2011
2011
2012
2012
2012
2013
2013
2013
2014
2014
2014
2015
2015
2015
2016
2016
2016
2017
2017
Packaging S&P 500
S&P 500 Average = 9.6
Packaging Average = 7.4x
Source: Capital IQ
Source: Capital IQ
Source: Capital IQ
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Acquirer Target Enterprise Value ($mm)
EV/EBITDA
Huntsman Packaging Applied Extrusion Technologies $318.7 9.2x
Madison Dearborn Partners Powerflute Oyj $402.5 6.7x
RPC Group Plc Letica Corporation $640.0 11.2x
Berry Plastics Group, Inc. AEP Industries Inc. $705.4 6.6x
WestRock (NYSE:WR) Multi Packaging Solutions $2,256.5 10.5x
Packaging Corp (NYSE:PKG) Columbus Container $100.0 3.3x
Mondi (LSE:MNDI) Beepack $45.6 6.1x
Packaging Corp (NYSE:PKG) Tim-Bar Corporation $386.0 4.3x
The Home Depot Interline Brands $1,630.0 12.4x
Rock-Tenn Company MeadWestvaco Corporation $11,184.2 11.5x
Rock-Tenn Company WestRock MWV, LLC $11,184.2 11.5x
KapStone Kraft Paper Victory Packaging, LP $640.0 11.6x
Median 10.5x
Mean 9.4x
Mike Schumacher | Managing Director917.789.2513 | [email protected]
Mike Schumacher covers the Packaging Products Sector and has over his 18-year investment banking career comple-ted transactions totaling over $10 billion in value, including debt, equity and strategic advisory transactions across all industrial equipment and distribution segments
Significant Selected US Precedent M&A Transactions
About Headwaters MB: Headwaters MB is an independent, middle market investment banking firm providing strategic merger and acquisition advice, capital raising and special situations advisory. Named “Investment Bank of the Year” by major industry organizations for its third year in a row, Headwaters MB is headquartered in Denver, CO, with six regional offices across the United States and partnerships with 18 firms covering 30 countries. For more information, visit www.headwatersmb.com.
To learn more about how the Headwaters MB team can help you grow from opportunities in the Packing Products sector, please contact:
Source: Capital IQ, Industry Research
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Arthur J. BentleyManaging DirectorAgricultural [email protected] x 211
Horacio FaccaManaging DirectorIndustrials / [email protected]
Grant GarbersManaging DirectorIndustrial [email protected] x 10
Darin GoodManaging DirectorBuilding Products & Construction [email protected]
Len LaPortaManaging DirectorIndustrials / [email protected] x 203
Samrat Karnik Managing Director Industrial [email protected] x 208
Len LaPortaManaging DirectorIndustrials / [email protected] x 203
Samrat Karnik Managing Director Industrial [email protected] x 208
Peter Nam Managing DirectorIndustrial [email protected]
Michael SchumacherManaging DirectorIndustrials / [email protected]
Doug UsiferManaging DirectorChemicals & [email protected]
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