Flexible Packaging Newsletter - Q1 2022

Flexible Packaging Trends 

Q1-2022 M&A activity has sustained its trajectory from 2021; we saw both strategic and financial buyers continue their pursuit of transactions across several industries. Despite a strong start to the year, the momentum is starting to face some challenges, many created by uncertainty in the global economy.

• Inflation is becoming a growing concern for flexible packaging manufactures. Increases in energy, transportation, and labor costs, have led to a tight market with high operating costs. In addition, the conflict between Russia and Ukraine, Russian sanctions, and the geopolitical repositioning among western and eastern countries, is influencing additional price increases of raw materials.
• The tight U.S. labor market continues to cause employers significant headaches. Wage increases alone have not been enough to entice and recruit skilled workers.

Despite these challenges affecting the flexible packaging industry, there are very favorable M&A conditions for flexible packing owners.

• Financial buyers have a large amount of excess capital (dry-powder) that they need to deploy. For financial buyers, flexible packaging is considered a desirable industry due to its healthy growth, low volatility, and attractive long-term economics, while delivering an essential solution/product to the overall economy. Also, the industry is fragmented, which suggests ample opportunities for consolidation and achieving economies of scale.
• Strategic buyers are actively seeking transactions to expand their capabilities, customers, market power, and to create centers of excellence.

We don’t believe the packaging industry will be isolated from the storms brewing in the global economy and will continue to face the same labor and supply chain challenges as most U.S. manufacturers. However, we believe that the industry will continue to be an active market for M&A transactions for at least the next two quarters.

Where Are Packaging Subsectors Valued? (EV/EBITDA)

Source: TKO Miller's Proprietary Middle Market Flexible Packaging Index

Recent Flexible Packaging News 

By Joe Froehlich on Apr 13, 2022 12:57:06 PM