TKO Miller Market Analysis
- Flexible packaging’s ability to replace other packaging formats has resulted in growth in the U.S. Flexible Packaging segment, increasing from 17 percent of the U.S. packaging industry in 2000 to 19 percent in 2018. Converter expectations for sales revenue are projected to rise about 3 percent to 5 percent per year and volume to increase about 5 percent to 6 percent per year. [Flexible Packaging Association – 2019 State of the Industry Report]
- TKO Miller saw a 7 percent decline in its proprietary flexible packaging valuation index (see below) from 2 to Q3. Part of this is attributable to the decline in both Berry Global Group and Mondi Plc’s TEV/EBITDA multiples (12 percent and 10 percent, respectively). Berry has suffered poor performance in its Engineered Materials and Health & Hygiene segments while Mondi has been hit by softening demand and an unfavorable pricing environment. The index’s performance contrasts with the S&P 500 index (see below), which has seen a 3 percent increase from Q2 to Q3.
- The average flexible packaging converter is a small to medium-size company with annual sales totaling $70 million [Flexible Packaging Association]. This fragmentation sets the stage for heavy M&A activity in the future, with many large strategic acquirers pursuing national roll-up strategies.
- TKO Miller continues to see larger players expressing a strong appetite for acquisitions, but demand continues to outweigh the supply of available businesses for sale.
Recent Flexible Packaging Transactions
July 2019 – Tekni-Plex purchases South American closure liner manufacturer, Geraldiscos
Tekni-Plex has purchased Brazilian closure liner manufacturer, Geraldiscos, which will become part of Tekni-Plex’s Tri-Seal business. Headquartered in São Paulo, Geraldiscos is known for manufacturing innovative closure liners and induction seals for a wide variety of container types including PP, PE, HDPE, PVC, PET, and glass. Closure solutions are provided for market segments such as food, beverage, personal care, healthcare, agriculture, chemical, and others. The acquisition adds 140 experienced employees to the 3,000 global Tekni-Plex team.
Aug. 2019 – Kohlberg closes on acquisition of Bemis Healthcare Packaging Europe; Merges with Nelipak
Nelipak® Corporation, Inc., a leading provider of custom designed packaging for the medical device and pharmaceutical industries, announced the acquisition of Bemis® Healthcare Packaging Europe (Bemis®) from Amcor’s Flexible Packaging business unit. The combined company will operate under the Nelipak® Healthcare Packaging brand. Nelipak’s in-house design, development, prototyping, manufacturing, and quality teams offer medical trays and blisters, custom built sealing machines, and other value-added services. Nelipak is a portfolio company of Mason Wells.
Sept. 2019 – Tekni-Plex acquires MMC Packaging
Headquartered Montreal, MMC has a three-decade long reputation as a leading automation equipment manufacturer of cap lining, slitting/folding, assembling and closing systems. MMC supports global customers in the food, beverage, personal and homecare, pharmaceutical, chemical, and industrial sectors. Tekni-Plex, Inc., together with its subsidiaries, develops, manufactures, and sells packaging materials, medical compounds, and precision-crafted medical tubing solutions for medical, pharmaceutical, personal care, household and industrial, and food and beverage markets.
Sept. 2019 – Licaplast acquires M’Plast
Licaplast Industries, a Charter Oak Equity portfolio company, has acquired M’Plast Inc. M’Plast, based in Montreal, specializes in the manufacturing, impression, and transformation of polyethylene film into bags or U-Film for a range of end markets, including horticulture, agriculture, and industrial uses. Licaplast is a vertically-integrated producer of flexible plastic packaging, including shrink film, laminated roll stock and pouches for food and beverage customers in the US and Canada.
Source: TKO Miller's proprietary Flexible Packaging valuation index & S&P CapIQ
Middle Market Valuation Multiples
Source: GF Data
Flexible Packaging News
Front-Loading Pouch Increases Production Efficiency
When packaging is at its value-added best, it may even help make production lines more efficient. Flexible packaging specialty company Shakoflex asserts that its Front-Loading Zipper (FLZ) pouches allow higher levels of successful and seamless filling of packaging on “pickn'fil” equipment than other methods. [FULL ARTICLE]
Dow Announces 2019 Packaging Innovation Awards Winners
Dow announced the winners of the 2019 Packaging Innovation Awards, the industry’s longest-running, independently judged packaging awards program. The Packaging Innovation Awards, now in its 31st year, recognizes the packaging industry’s top achievements in innovating packaging design, materials, technologies, and processes. The highest honor, the Diamond Award, went to Dai Nippon Printing Co’s packaging division for its DNP Functional Film Complex PET plastic bottle. The product is an environmentally conscious and brand-friendly bottle alternative that offers a distinct glass-like appearance due to a peelable outer layer which can act as an oxygen barrier when combined with PET. The judges evaluated nearly 250 entries from companies in more than 30 countries. [FULL ARTICLE]
Exponential Growth Forecast for Cannabis Packaging
Demand for cannabis product packaging is anticipated to reach $278 million in 2019, increasing 31 percent per year to $1.1 billion in 2024. Primary and secondary containers (e.g., jars, bottles, folding cartons) will continue to account for the largest share of packaging demand at 62 percent of sales in 2024. [FULL ARTICLE]
About TKO Miller
TKO Miller, LLC is an independent, advisory-focused, middle market investment bank. With over 130 years of collective transaction experience, TKO Miller provides merger and acquisition and financial advisory services for privately-held and private-equity owned businesses, with a special focus on family-and-founder-held businesses.
Flexible Packaging is one of TKO Miller’s core industry focuses, along with Consumer Products, Industrial Services, Manufacturing, Business Services, and Health Care. After advising numerous flexible packaging and printing companies on M&A and financing transactions, TKO Miller’s professionals have developed deep industry knowledge and a broad contact network that accompanies their transaction expertise with privately-held companies.
TKO Miller aims to bring value to clients by combining outstanding people with a results-oriented, flexible approach to transactions. Our services include company sales, recapitalizations, asset divestitures, and management buyouts. TKO Miller has a generalist focus and has served clients in a wide range of industries, including manufacturing, business services, consumer products, and industrial products and services. For more information, visit our website www.tkomiller.com