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Market Monitor: Packaging Materials

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Packaging Materials M&A volume in 2023 was in one word, Muted. Another completed rotation around the sun and out from the remnants rises a new year of possibilities and opportunities.  The general consensus is that 2023 was a rebuilding type of year as packaging business owners acclimated to the beginning of a new economic cycle.  After realizing blistering paces of growth ascending from the short-lived, pandemic-induced recession of 2020, most packaging businesses, like plethora of sectors, are down materially compared to 2021 and 2022.

That said, do not misconstrue for distressed.  Quite the contrary, the packaging universe and its participants remain one of the most investable by way of private equity and debt capital markets.  Whether its resin producers-to-paper mills or film & paper converters – the current business climate is such that broad price increases have hit a ceiling; simply having access to supply is no longer the advantage it was several years ago.  This forces the competitive battlefield for new business wins (and therefore organic growth) back to the fundamentals:  innovations & solutions, quality, customer service.

While 2023 earnings may be suppressed compared to prior years, business sentiment optimism builds every week as interest rate hikes have peaked, jobs picture remains strong and (at least) anecdotal evidence a soft landing is possible – though we won’t officially know until after the fact.  Until then, business owners, including the institutionally-backed, are biding their time, resetting the go-to-market picture until an opportune moment arises to capitalize on a liquidity event.

Looking at the data – 2023 transaction volume in Packaging Materials was approximately one-half either of the two years prior but still managed to reach 2020 transaction activity levels.  Not surprising as much of the would-be volume from financial sponsor-backed packaging companies sat on the sidelines in 2023.

Packaging Materials valuations have declined from the highs seen beginning from H2 2020 through H1 2022.  That said, we are in a very different economic cycle from several years ago and valuations remain robust from a long-term historical perspective; currently in-line with post-Great Recession averages.

We anticipate a modest recovery in Packaging Materials transaction volume in 2024 as many business owners right-sized their organizations in 2023 and have now charted the path in anticipation of the next cycle of growth.


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Andrew Suen, Managing Director: