Report: Portfolio Realignment, Sustainability Driving Packaging M&A Activity
Capstone Partners, a middle market investment banking firm, recently shared some insights in its November 2024 Packaging Industry Update. According to their report, the packaging industry has seen a rise in merger and acquisition (M&A) activity driven by the adoption of sustainable solutions and companies looking to optimize their portfolios. In fact, portfolio realignment transactions have been a big part of deal-making in 2024. Public strategic buyers have been focusing on transactions with each other and investing capital to enhance their portfolios. By shedding segments that don’t fit with their optimization strategies, companies are not only improving their balance sheets but also aligning themselves better with market demands and regulations.
A key aspect of sustainability initiatives in the packaging sector is extended producer responsibility (EPR). This means that producers are expected to take responsibility for the treatment and disposal of post-consumer products. The US government is gearing up to enforce regulations on this front in 2025. In a recent development, California’s Attorney General, Rob Bonta, filed a lawsuit against ExxonMobil for allegedly misleading the public about plastic recycling efforts, seeking “multiple billions of dollars” in civil damages.
With changing trade policies and tariffs, packaging players are adjusting their production strategies. Canada has adjusted its tariff structures to match the US for certain goods, leading companies to explore production options in Mexico. Trade agreements like the US-Mexico-Canada Agreement (USMCA) offer a smoother path for North American production without disruptions from overseas manufacturing.
One notable acquisition in the market was Mauser Packaging Solutions’ subsidiary, BWAY, acquiring Mexico-based Taenza, a manufacturer of various types of cans and pails. This move coincided with the closure of Mauser’s Aerosol Can business in Ohio and Wisconsin due to ongoing economic challenges. These shifts indicate a trend where production facilities are moving to Mexico to serve the US and Canadian markets more efficiently.
As we move beyond the impacts of the pandemic and see stability in demand for packaging products, the industry is poised for growth. Factors like sustainability innovations, increased M&A activity, and market confidence are driving interest from private equity groups and strategic buyers. Capstone managing director Mike Schumacher emphasized the positive outlook for the packaging sector, highlighting the sector’s strength in M&A and the potential for continued growth.
