The plastics industry is seeing continued strength, with segments outperforming the broader industrials market, according to the Plastics & Packaging Insider, an industry report by Brown Gibbons Lang & Company (BGL).
The BGL report documents continued strong private equity interest in the plastics space, with differentiated businesses in high demand, supported by findings from a roundtable survey of equity sponsors with investments in the industry. The fragmented landscape is conducive to acquisitive growth, with sponsors aggressively pursuing synergistic buys that bring technology and capability expansion and access to new markets.
"Of particular interest is a focus on complex parts and sub-assemblies—being a value-added, full service supplier to your customers. Certainly for the larger OEMs, the one-stop shop is very appealing," says Joe Heinen at Goldner Hawn Johnson & Morrison, a participant in the report.
"In any of these plastics businesses, you're taking advantage of the fragmentation in the market and the ability to find add-ons for these platforms," adds Russ Spieler of Capital Partners.
Medical, aerospace, and automotive are among the markets seeing outsized growth, where underlying demand drivers indicate strong near-term revenue visibility. High quality plastic component and packaging manufacturing assets are receiving strong reception from buyers and lenders which is fuelling an active M&A market. OEMs are returning to core competencies and increasingly outsourcing manufacturing functions, looking to suppliers as an extension of their product development and production. Size and scale are of increasing importance to support customers across geographies, particularly as OEMs reduce their supplier bases. These market dynamics are fuelling consolidation.
M&A activity involving plastic component manufacturers over the last 12 months included in Newell Rubbermaid (NWL)/Jarden (JAH); NN (NNBR)/Precision Engineered Products; and TransDigm Group (TDG)/Pexco Aerospace Business. Medical plastics saw significant activity including ESCO Technologies (ESE) with two acquisitions (Plastique Group Limited and Fremont Plastics); Pexco (Scientific Plastics and Precision Extrusion), and Technimark (Ci Medical Technologies) among the recent deals.
"There will be continued consolidation. It is largely as a result of customers demanding more, so you will see consolidation among technologies – moulding, 3D printing, machining – to build the presence that customers require," says Jud Samuels at New Heritage Capital.
