The new dynamics of M&A

Labels and packaging have been a boon for M&A over the last decade. Fragmentation, local/regional competition, innovation, customer demand — and, of course, high margins — created opportunities not seen in other similar-sized industries. Private equity (PE), strategics and entrepreneurs all got in on the action, adding girth, territories, capacity and more that have afforded notable value creation and success.

M&A drivers have now changed. The abundance of transactions — both large and small — has created an entirely new landscape. Different factors are needed to compete, so different factors need to be considered for growth. To complicate matters, with the number of acquisitions completed in the US and European Union over the past 10 years, there are few remaining independent targets.

“The plays being made now will go beyond scale, geographies and end-market focus and be more about creating formidable and specialized entities”.

Entrepreneurs must understand these shifts and how they affect the way they run their businesses for the future. Every owner at some point either acquires and builds, or divests their company. And sometimes, you may need to act quickly. So, it’s important to keep your organization up to date and in synch with current dynamics.

While not as fast-moving, labels and packaging M&A activity continues to be strong, as the industry remains attractive to investors. But the plays being made now and in the next few years will go beyond scale, geographies and end-market focus and be more about creating formidable and specialized entities.

The ‘new label majors’ will pursue acquisitions and divestitures by what they perceive are the next critical, high-profit opportunities. And we’re already seeing this in play. New deals are being prepared with a greater focus on operations and market concentration.

Continued...

For the full Labels & Labeling article click here.