Packaging Industry Update

Introduction

Harris Williams is pleased to present our packaging industry update for August 2018.  This report provides commentary and analysis on current capital market trends and merger and acquisition dynamics within the global packaging industry. Overall, the packaging industry continues to benefit from a number of strong secular trends; in this report we highlight several of these trends, including the recent advent of smart packaging and the dramatic rise of e-commerce.  Given these factors, among others, deal activity in the packaging industry has remained at elevated levels throughout the first eight months of 2018. We hope you find this edition helpful and encourage you to contact us directly if you would like to discuss our perspective on current industry trends or our relevant industry experience.

Upcoming Industry Event

picture1_20.pngPACK EXPO Chicago

Harris Williams will be attending the 2018 PACK EXPO conference on October 14-17th at McCormick Place.  We hope to see you in attendance.

Let the team know if you will be there and would like to connect.

Medical Plastics And Packaging: Convergence Creates Opportunity

Both the plastics and packaging and the medical sectors are experiencing thriving M&A environments, spurred by investor interest in each sector’s unique strengths and their common trait of steady, recession-resistant demand. When two such attractive sectors intersect, it creates substantial opportunities.

In this article, senior bankers from Harris Williams’ Industrials and Healthcare and Life Sciences (HCLS) Groups share their perspectives on what’s putting medical plastics and packaging on the radar for so many strategic buyers and investors.

Deal Spotlight: Precision Global

picture1_21.pngHarris Williams exclusively advised Peak Rock Capital on the sale of its portfolio company, Precision Global, a leading global provider of dispensing solutions, to ONCAP. Within the dispensing solutions industry, the Company supplies a variety of attractive and growing end markets, including personal care and pharmaceutical, among others. Headquartered in South Carolina, the Company employs over 1,500 people and operates a multinational network of 18 facilities spanning 15 countries.

 

Strong Momentum Across the Packaging Industry

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What We’re Reading

How Flexible Packaging Trends Are Shifting And Why

Packaging Digest  8/29/2018

Technological innovation, sustainability concerns and attractive economics are among the reasons for the phenomenal growth of flexible packaging in the last two decades in the U.S. With an estimated $31 billion in sales in 2017, brand owners are embracing films, pouches and bags as a go-to packaging solution, thanks in part to wide acceptance by American consumers, but noteworthy changes are currently afoot.

Read the full article here.

Smart Labels: The Next Big Thing In IOT And Packaging

Packaging Strategies  8/14/2018

Smart labels are created by combining three technologies: plain text, radio code and optical character recognition. Smart labels are divided into chip labels, printable labels and electronic labels due to their different applications. However, the use of smart labels has evolved and can be used to recognize stale food in the refrigerator. Due to the instant access to the information, several industries have adopted smart labels, especially in the food and beverages market.

Read the full article here.

Digital Print For Packaging – A Broad View

Packaging World   8/3/2018

New developments in digital printing and finishing as it relates to packaging are unfolding at such a rapid clip these days that anything resembling a comprehensive overview would be difficult at best. Corrugated is seeing lots of innovation in digital printing technology, but a look across all packaging material substrates reveals fresh new initiatives just about everywhere.

Read the full article here.

Build Consumer Trust With Clean Packaging

Packaging World  7/30/2018

Clean food has been making its way onto menus for more than a decade, and as more and more consumers demand transparency around what they’re eating, some are beginning to look more critically at the safety of the packaging their food comes in.

Read the full article here.

Targeting Millennials And Gen Z With Packaging

Package Printing  6/11/2018

Although the definition of “millennial” may vary slightly depending on whom you ask, in general, millennials are defined as those born in the years between 1980 and 2000, with Gen Z following immediately after that. And while Gen Z’s characteristics are still evolving, there are definite differences between the two generations that must be considered and addressed when marketing to these two consumer sets.

Read the full article here.

Key Themes

M&A Activity In The Packaging Industry1, 2

  • M&A activity in the packaging space remains elevated.screen_shot_2018-09-07_at_3.23.54_pm.png
    • On an LTM basis as of August 2018, $36.6 billion of deal value has been announced globally vs. $24.7 billion for the prior year.
    • Announced deal value for Q3 2018 alone is already more than four times that of the prior year period ($8.1 billion in Q3 2018 vs. $2.0 billion in Q3 2017).
  • Packaging industry M&A remains robust globally, with the majority of LTM August 2018 targets located in Western Europe (35%), North America (31%), and the Asia Pacific region (21%).
  • Five deals over $1 billion have been announced or closed in the last twelve months.

 

Consumer Engagement Trend Drives Innovation In Smart Packaging3

  • Smart packaging is commonly defined as an addition of the communication function to traditional packaging, and communicates information to the consumerscreen_shot_2018-09-07_at_3.25.37_pm.png based on its ability to sense, detect, or record external or internal changes in the product's environment.
  • Brand owners are increasingly demanding functional packaging, as opposed to just a technology or component, that adds real value to their brand, rather than short-term marketing  gimmicks.
  • Other technological developments in printed electronics, Cloud computing and the Internet of Things are also driving the increased adoption of smart packaging technologies.
  • As a result, the global smart packaging market is expected to experience strong growth in the years ahead, and is forecast to grow from $5.3 billion in 2016 to nearly $7.6 billion by 2021—an annual CAGR of 7.5%.

 

Dramatic Growth In e-Commerce As A Global Sales Channel4

  • screen_shot_2018-09-07_at_3.28.18_pm.pnge-commerce currently accounts for an estimated $2.3 trillion, or ~10.5%, of the ~$22 trillion global retail market; this dollar value is expected to nearly double by 2021, with more people gaining access to the internet, driving significant change within the packaging industry during this period.
  • The emergence of e-commerce has created a number of new considerations for the packaging industry as a whole; several key considerations include:
    • Brands and CPG manufacturers are having to reassess how they package products for the online shopper and to adapt to new generations of tech-savvy consumers; and
    • e-commerce shipping cases must be strong enough to withstand a substantially more complex, and less automated, supply chain than for traditional retail.

Public Comparables1

As of August 27, 2018 ($ in millions, except per share amounts)

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Notes: LTM as of most recent reporting; free cash flow conversion defined as EBITDA less capital expenditures divided by EBITDA.

Public Markets Overview1

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Select M&A Activity1,2

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1. FactSet

2. MergerMarket

3. Smithers Pira

4. Smithers Pira

 

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.

 

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