Nick Wood, director and industry leader, print, paper and packaging, Deloitte, said that 2015 was another strong year for the sector from an M&A perspective, characterised by ongoing demand from corporate acquirers and private equity investors, rising valuation multiples being paid for quality assets, and lower commodity prices which helped deliver strong earnings.
There was increased investment from the US to Europe, particularly the UK, with Deloitte having helped a number of shareholders either sell to US investors as well as help US acquirers invest in the UK over the last 12-18 months.
“It is now seen as the most valuable deal corridor in the world, with US businesses acquiring more UK assets than all other countries combined. In the last 18 months, there were 300 deals by US purchasers of UK assets and 190 deals of UK purchasers of US assets,” said Wood.
He pointed out that 2015 saw an increase in the average deal size, which grew from around £60m in 2014 to around £117m in 2015.
“This has been influenced by firstly an increase in the EBITDA multiples for the sector – the average enterprise value / EBTIDA multiple of our basket of quoted companies have increased to 9.0x in Q4 2015 compared to 8.2x in Q4 2015.”
The second influence over 2015 that the Deloitte packaging chief analyst had observed has been the number of large deals recorded during the year. The five largest recorded deals in the year were:
- Merger of Rock-Tenn Company and MeadWestvaco for £11.5bn
- Ball’s acquisition of Rexam for £5.5bn
- Owen Illinois’ acquisition of Vitro’s food and beverage glass container business for £1.55bn
- Gerresheimer’s acquisition of Centor for USD £520m
- Carlyle’s acquisition of French glass packaging company Saverglass for £436m.
Wood said there were mixed views regarding expectations for 2016. From a wider macroeconomic perspective, a slowing Chinese economy, volatility in oil prices and some softening in US and European debt markets has led to a degree of cautiousness with market participants.
This resulted in the Q4 2015 Deloitte CFO survey showing a dip in risk appetite for the second quarter in a row.
“That being said, we have not seen this translate into a reduced appetite for M&A led growth and the number of corporates with heathy balance sheets seeking acquisitions remains very high, “ he explained. “Similarly, following successful fund raising processes or slower than expected deployment rates, the dry powder available in private equity funds remains at an all-time high. For owners of quality businesses, it feels like 2016 could be a sellers market.”
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