Report: Portfolio Realignment, Sustainability Driving Packaging M&A Activity
Capstone Partners, a middle market investment banking firm, recently released its November 2024 Packaging Industry Update. According to their findings, the packaging industry has seen a rise in merger and acquisition (M&A) activity driven by a focus on sustainability and portfolio optimization.
In the world of packaging, companies are looking to realign their portfolios by offloading segments that no longer fit their optimization strategies. This approach not only improves balance sheets but also positions companies to better meet market demands and regulations. The continued adoption of environmentally sustainable solutions is a key driver behind these portfolio realignment transactions.
One significant aspect of sustainability in the packaging sector is Extended Producer Responsibility (EPR). This concept holds producers accountable for the treatment and disposal of post-consumer products. In the US, the government plans to enforce regulations around EPR in 2025. Recently, the California Attorney General filed a lawsuit against ExxonMobil for misleading claims about plastic recycling, seeking “multiple billions of dollars” in civil damages.
Trade policies and tariffs are also influencing production strategies in the packaging industry. For instance, companies are eyeing Mexico as an alternative production hub due to aligned tariff structures with the US and favorable trade agreements like the US-Mexico-Canada Agreement (USMCA). This shift in production focus is evident in Mauser Packaging Solutions’ recent acquisition of Mexico-based Taenza and the closure of its aerosol can business in the US.
As the packaging sector moves past the initial impacts of the pandemic, there is a growing confidence in the industry. Companies are looking at factors like recent performance, margin sustainability, and revenue predictability when evaluating potential targets for M&A. Sustainability and innovation in packaging, along with an expected increase in M&A activity, are set to drive further growth and interest from private equity groups and strategic buyers.
According to Capstone managing director Mike Schumacher, the future looks promising for packaging M&A, with a strong focus on sustainability and an influx of investment from various stakeholders.
