Resource Label Group (RLG) is a North American leader in the label industry with locations in the U.S. and Canada. Harris Williams recently advised RLG, a portfolio company of First Atlantic Capital and TPG Growth, on its sale to Ares Management Corporation. RLG is a full-service provider of pressure sensitive labels, extended content, shrink sleeve, and RFID/NFC technology for the packaging industry.
Here, four members of our Industrials Group discuss what makes the packaging industry compelling, and why labels are a valuable subsector. They also explore why RLG is a particularly attractive asset and what buyers should know when considering an investment in packaging, and in labels specifically.
What is appealing to buyers about packaging?
McNulty: Packaging is a stable and diversified industry. Even as consumer tastes adapt and evolve, the need for packaging will always exist. From a consumer standpoint, the packaging is the brand. So as we see more niche brands emerge and SKU proliferation continue, compelling packaging and labels will become even more important. Today’s consumer-facing businesses need partners with the flexibility to offer shorter runs, and deliver packaging that stands out.
Morrison: Within this landscape, the $10B+ labels market is especially attractive. Labels are a product’s key interface with end customers, and they are an effective way for businesses to differentiate their offerings. The best label companies can add significant value to brands by providing a visual identity that helps attract buyers. And because the industry is highly fragmented, M&A opportunities abound.
What makes RLG a particularly attractive asset?
Denoncourt: RLG has taken a smart, strategic approach to growth, and has completed 18 successful acquisitions since 2011. When selecting companies to acquire, it identifies high-performing, profitable businesses that excel at their areas of focus across a variety of product technologies, geographies, and end markets. In the process, RLG has developed a repeatable, systematic, and highly accretive M&A engine.
Lautemann: RLG’s strategy focuses on serving small- to mid-size customers that want shorter runs, in part because these types of businesses tend to generate more attractive margins. By prioritizing M&A to reach these markets, RLG has built a nationwide footprint with some purposeful redundancy. So if a customer needs the same label type in two different regions, RLG can quickly print identical products in both locations. This strategic position allows the company to prioritize the highest-quality, fastest-growing elements of the market while providing both national and local attention.
McNulty: Their team also embraces complexity by taking on challenging projects that other competitors avoid. So RLG has all the capabilities that the best local provider would have, coupled with the scale that allows for investments in value-added services. This combination differentiates RLG from many other competitors and creates above-market growth projections.
What should other prospective buyers know about the packaging and labels industry?
Denoncourt: Packaging is a very service-oriented industry. Companies need to deliver perfectly every time, on time, regardless of where their products are going. And they have to do so at a competitive price. The small, local players have developed deep relationships with their customers, but they have limited ability to scale. With the right acquisitions, a company can build a network of specialized providers that bring a deep customer network.
Morrison: The best companies recognize that packaging is more than just a label or box. They help their customers build their brands with hands-on consulting that finds new ways to boost the label’s value. These capabilities can include technology, like RFID, that introduces new ways of interacting with consumers at the point of purchase. Leading label companies may also offer sophisticated design guidance, expanded content, or specialized materials.
Lautemann: M&A can be a great way of gaining those capabilities and offering more solutions. There’s also significant remaining opportunity to acquire smaller label businesses. For both reasons, we expect the M&A environment to remain very active.
With that in mind, companies need to have a clear, demonstrated growth plan. Ideally, they’ll be able to balance both organic expansion and M&A that strategically consolidate this fragmented industry.
Please contact our senior bankers to learn more.
Industrial companies represent the backbone of the manufacturing economy, and the Harris Williams Industrial Group has a long-standing heritage of providing superior-quality advisory services to a spectrum of growth and manufacturing businesses. We've represented companies in a variety of industries that produce niche products with leading market positions and technologies.
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Published July 2021