AWA Reports on M&A Executive Forum

 

AMSTERDAM, THE NETHERLANDS | Financial experts exchanged ideas at the recent Mergers & Acquisitions Executive Forum 2014 in Chicago conducted by AWA Alexander Watson Associates.

“There is a huge pent up demand of equity in the US,” said Jim Hill, Partner with Benesch, Attorneys at Law. “Strategic buyers have $1.8 billion in cash on their balance sheets. What’s lacking is inventory.” Hill noted that 2013 activity was affected by the “rush to exit in 2012 because of the capital gains taxes.” Good companies had high EBITDA multiples, he said, and great companies had even higher multiples than in 2007. Middle market deals were over 60% of all transactions.

Thomas Blaige, chairman and CEO of investment bankers Blaige & Co., presented data from the company’s research on how the number of transactions has increased significantly from 2001 to 2013, and said that in 2001 85% of all buyers were strategic but in 2013 that number dropped to 65%. The entire packaging value chain—from machinery, materials, processors to key packaging end-users—is seeing continued growth in mergers and acquisitions, according to Blaige.

In the processing area, the industry is dominated by large consolidators that are increasing in size. However, activity among Asian players has been limited—ignoring opportunities that these markets represent. In the containerboard industry, there is an interesting dynamic, said Bill Hornell, managing director for Mesirow Financial. In North America in 2013, the top three containerboard producers represent 62% of the market. And, “there is no meaningful private equity stake in the top 20 producers.”

A panel discussion led by Blaige delivered insight on M&A activity in the packaging industry. Among the highlights:

• “The market is pretty aggressive from a valuation standpoint,” said Tom Parro, managing director with MERC Capital Corporation. “The market is driven by a lot of capital and liquidity out there. Now is the time.”

• “2013 was not as good as 2012,” said Jay Radtke, director at Mason Wells. “There were not as many family-owned businesses on the market because of the US tax law changes, but those will start to come back and be on the market. It remains a solid environment.”

• With reluctance to commit to a specific number, the panel agreed that, although multiples were 6x two years ago, today they are around 7-8x. Justin Shein, director, Business Development for Amcor Flexibles, said that the multiples can vary by application. “Medical multiples are around 8, 10, or even 11-12. Commodity products can be 5-6, with food and non-consumer products somewhere in the middle.”

• For sellers, Jim Hill recommended, “one of the most important thing you can do is have your own quality of earnings statements—this will help show you the holes in your financial statements, and make the entire process easier.”

Other highlights were shared by leaders in the M&A field, including market overviews by AWA highlighting growth opportunities in Labeling and Product Decoration, Specialty Tapes, and Graphic Arts markets.

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