UK leads European packaging industry acquisitions

Article taken from packagingnews.co.uk – 4 June 2015

A new study from Frost & Sullivan reveals that over the 2010-2014 period, the UK struck the most packaging industry M&A deals, followed by France and Germany.

The study shows that M&A activity has slightly boosted the European packaging industry during a difficult time, with key deals having been completed in the UK.

Nicholas Mockett, head of packaging M&A, Moorgate Capital, toldPackaging News: “The UK currently has a relatively sizeable number of large packaging companies which are listed on the stock exchange and are leaders in their chosen segments. All of those have been involved in M&A in the last year including  DS Smith/ Duropack, RPC / Promens, Smurfit Kappa / Inspirepac and of course the bid for UK’s Rexam by Ball at £4.4bn – which is material in the context of global packaging M&A, let alone European.

“There have been other notable transactions in Europe outside of the UK such as Constantia in Austria which was acquired by PE firm Wendel. There have also been smaller deals involving UK players such as Faerch’s acquisition of Anson, quite often reflecting the innovation which UK packaging often exhibits, which in itself is often attributed to the advanced grocery retail model and convenience culture.”

The study, ‘Investment Analysis of the European Packaging Industry’, also shows that the European packaging industry has been spending between five and six percent of its revenue on technical innovations and machinery, resulting in consistent earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins ranging from 11 to 13%.

It found that industry participants are also focussed on bringing down cost metrics as revenue growth is restricted by price pressures and sluggish end-user demand.

“Heightened M&A activity and the implementation of other strategies have increased the interest coverage ratio and improved profitability margins slightly in the European packaging industry,” said Frost & Sullivan Business and financial services senior research analyst E. Saneesh. “While the cash and current ratio values for the industry are stable, the average cash conversion cycle has declined, indicating that the operating efficiency of the entire supply chain is improving.

“For further progress, process improvement and product strategies to cater to consumers’ preference for convenient, storable and sustainable packaging will be desirable,” noted Saneesh. “Diversifying into other industries will also be important for packaging companies looking to cope with the volatile business environment.”