trends in flexible packaging m a - aimcal · company: mazzone & associates. company profile:...

2018 Packaging Industry Benchmarking Study | 1

TRENDS IN FLEXIBLE PACKAGING M&A

MAZZONE & ASSOCIATES, INC.

FALL 2018


INTRODUCTION

Name: Jonathan White

Title: Managing Director

Company: Mazzone & Associates

Company Profile: Mazzone & Associate’s senior leadership has deepfinancial, operational and transaction expertise in packaging, includingworking directly for large packaging companies such as Rexam PLC andJabil/Nypro, as owners of packaging companies such as Primary Packaging,and as trusted advisors to the sector. This insight provides particular valueto advisory clients in packaging markets.

Offices: Atlanta, Georgia & Chicago, Illinois


CONTENTS

Views on Flexible Packaging

Mergers & Acquisitions Activity

Special Topics Impacting Valuation

Summary

II

III

I

IVIV

I


TRENDS IN FLEXIBLE PACKAGING MERGERS & ACQUISITIONS

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Revenue Growth EBITDA Growth

Median Annual Revenue and EBITDA Growth – All Packaging

Source: Capital IQ

I. Views on Flexible Packaging




By SubstrateAll Packaging

6.1%

-3.3%4.6%

10.4%7.8%

-5.0%

0.0%

5.0%

10.0%

15.0%

2014CY 2015CY 2016CY 2017CY 06/30/18

3.4%-0.4%

4.1%

6.6%

3.8%4.8%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Average Sales GrowthFour Year CAGR = 4.8%

Average Sales CAGR2013 to H1-2018

Source: Mazzone & Associates Packaging Benchmarking Study, 2018



Source: Smithers Pira

2.9%

1.0%

2.4%

1.4%

2.8%

3.4%

3.4%

2.4%

4.0%

3.8%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%

Total PackagingOtherGlassMetalBoard

Rigid PlasticFlexible Paper

Flexible FoilFlexible Plastic

All Flexible Packaging

Revenue CAGR % 2017-2022





EBITDA Margins – All Packaging

14.0% 14.2%

15.1% 14.8%

15.1% 15.2%

11.6%12.1%12.6%13.1%13.6%14.1%14.6%15.1%15.6%

2013CY 2014CY 2015CY 2016CY 2017CY 06/30/18

14% Long Term Mean Margin





Average N.A. EBITDA Margin, 2013 to H1-2018

14.0%

16.2% 15.6% 15.2%13.4%

14.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Cans Glass Paper Plastic MultiSubstrate

All





Four-Firm Ratio for Paper & Packaging End Market

Source: Citi GPS

97% 95%

79%72%

47%

28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Glass Containers Beverage Cans Bleached Board Containerboard ProtectivePackaging

FlexiblePackaging




Strategy Alternatives

ConstructionsDegree of IntegrationConverted FormatMarketDecorative Technology




Source: Freedonia, Smithers Pira, LEK Consulting

US Packaging Sales (2013-18F, $ Billions)

-

20

40

60

80

100

120

2013 2018F

Consumer Plastic 2.3%Consumer Paper/Foil 1.4%Industrial Plastic 1.1%Industrial Paper/Foil 0.3%

Mix in substrate (towards plastic) and format (towards flexible) are driving differential growth rates within the packaging sector

Glass, Wood, Metal, Paperboard

0.0%

Rigid Plastics 2.2%




New US CPG Product Introductions(1998-2016)

Source: USDA, ERS

2.8%

0.5%

6.2%

2.0%

-3.7%

-1.0%

1.6%

-1.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

3-Year CAGR SOM Change

Private Label Small (<$1B)Med ($1-$3B) Large (>$3B)

Source: Euromonitor, PwC 2017

Trend favors (i) shorter run converters and (ii) converters who can bring expertise that these customers lack

0

5,000

10,000

15,000

20,000

25,000

30,000

1998 2001 2004 2007 2010 2013 2016Food Nonfood

in 000’s

CPG Growth




Trend favors (i) shorter run converters and (ii) converters who can bring expertise that these customers lack

Source: LEK Consulting

Long Runs Short to Medium Runs

85% 84% 83%

15% 16% 17%

0%

20%

40%

60%

80%

100%

2008 2013 2018F

30% 28% 26%

70% 72% 74%

0%

20%

40%

60%

80%

100%

2008 2013 2018F

20% 15% 10%

80% 85% 90%

0%

20%

40%

60%

80%

100%

2008 2013 2018F

Tier 1 Manufacturers Tier 2 Manufacturers Tier 3 Manufacturers

US Plastic Packaging for F&B products by Run Size (2008-18F)




Shorter runs and improved technology are opening the door to digital printing at the expense of legacy printing technologies

Source: Packaging World, Smithers Pira, LEK

N.A. Package Printing Market by Process (2003-18F, $ Billions)

CAGR 13-18FDigital 16.2%Screen (2.5)%Gravure 1.2%

Offset 1.8%

Flexo 1.1%

-

20

40

60

80

100

120

2003 2006 2008 2013 2018F


CONTENTS




Summary

II

III

I

IV




Summary

I

II

III

IV



II. Mergers & Acquisitions Activity

Source: Cap IQ, Mazzone & AssociatesData as of October 1, 2018

Disclosed Transaction Volumes – All Packaging 2008 to 2018

Transactions $ in Billions

0

5

10

15

20

25

30

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018YTD

# of Deals Dollar Volume




Source: Mazzone & Associates Research

Packaging Transaction Volumes, YTD 2018Total Number of Transactions = 169

4225%

4426%

3018%

5331%

Paper Flexibles Rigid Other




Publicly-Traded Comparables: All Packaging2013 to H1- 2018 EV / EBITDA

9.8x 10.2x 12.1x

11.3x 11.3x 10.1x

–

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

2013CY 2014CY 2015CY 2016CY 2017CY 06/30/18





Publicly-Traded Comparables: Flexible Packaging2013 to H1-2018 EV / EBITDA

10.1x 10.9x

15.1x

11.5x 13.2x

11.0x

–2.0x4.0x6.0x8.0x

10.0x12.0x14.0x16.0x

2013CY 2014CY 2015CY 2016CY 2017CY 06/30/18





5.0x

3.8x

4.6x4.9x 5.1x 5.3x

5.7x 5.6x 5.4x5.7x 5.5x

.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2018

Tota

l Deb

t / E

BITD

A

Average Debt / EBITDA Multiples for all Domestic Firms




Source: Mazzone & Associates Research

145 60%

96 40%

Financial Strategic

Total Deal Volume byBuyer Type, 2017

Total Deal Volume byBuyer Type, YTD 2018

2314%

4828%

9858%

Financial Buyout Financial Add-on Strategic




North American Flexible Packaging Industry by Company Size

28%48% 46%

47%30% 29%

25% 25% 25%

0%

20%

40%

60%

80%

100%

1996 2006 2016

$500mm+ $50-500mm <$50mm




Source: Pitchbook, Mazzone & AssociatesData as of October 1, 2018

EV/EBITDA Multiples2014 to YTD 2018

7.4x

9.4x

6.1x

10.6x

8.5x7.5x

8.5x7.4x

8.8x 8.9x

.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2014 2015 2016 2017 YTD 2018

Flexibles Total Packaging


CONTENTS




Summary

II

III

I

IV




Summary

III

III

IV



III. Special Topics Impacting Valuation

Geographic Segmentation of Deals YTD 2018

Source: Mazzone & Associates

95% 12

7%

7243%

7645%

In-bound to US Out-bound from US Domestic Non-US



7

11

9

28

27

56

57

79

0 10 20 30 40 50 60 70 80 90

Entry

Expansion ofProduct / Market

Geographic Expansion

Market Share /Consolidation

All Flexibles


PackagingTransactions – Apparent Motivations

Source: Mazzone & Associates



III. Special Topics Impacting ValuationInput Cost Price Trends

Source: HIS Chemical and Robert W. Baird & Co.

August 2018 Resin Price ProfileSource: Robert W. Baird & Co Equity Research.



III. Special Topics Impacting ValuationPackaging Sector Return Mins S&P 500 Return

Source: Capital IQ

Last Twelve Months Stock Prices

S&P 500 Flexible Packaging

Source: Capital IQ

48.6%

27.8%

-9.7%

23.2%

-4.3%7.4% 5.5%

14.8%

-0.5%9.0%

-0.8% -5.4% 0.7%6.4% 3.0% 3.1% -5.4% -12.2%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018

130%

120%

110%

100%

90%

6-Aug-17 6-Nov-17 6-Feb-18 6-May-18 6-Aug-18




Packaging Valuation Based on NTM EV/EBITDA

Source: Factset, R W Baird




Source: Ocean Conservancy

Top 10 Marine Debris Items

Source: Citi Research, Sustainable Packaging Coalition

Availability of Recycling Programs by Material




Median Net Debt/LTM EBITDA Ratio

Source: Capital IQ

Median Net Debt /LTM EBITDA

Median Since 1995


CONTENTS




Summary

II

III

I

IV




Summary

I

II

III

IV


MAZZONE & ASSOCIATES

Dominic C. Mazzone Managing DirectorMr. Mazzone has experienceexecuting hundreds of

mergers, acquisitions and financingtransactions, domestically and

internationally, of all sizes and totaling morethan $20 billion in collective Enterprise Value.He currently sits on the Board of Directors ofGuardian Fueling Technologies and spent fouryears on the Board of Advisors for theHoneyBaked Ham Company of Georgia.Prior to forming the firm, Mr. Mazzone was theGeneral Counsel of Oxford Industries, Inc. andhead of mergers and acquisitions in The HomeDepot’s legal department. Before joining TheHome Depot team, Mr. Mazzone practiced lawat Alston & Bird LLP.

Jonathan T. White Managing DirectorMr. White joined Mazzone & Associates in 2017, focusing

on industrial transactions, primarily in the printing,

packaging and manufacturing space. He has successfully completed transactions across a variety of industries, including manufacturing, plastics, metals, packaging, lighting, and automotive/transportation. Prior to joining the firm, Mr. White was SeniorDirector of Strategic Investments for Jabil Inc.,where he engaged in defining and executingJabil’s expansion into the consumer packagingindustry. Prior to Jabil, he served as CFO andDevelopment Officer for two private groupsinvesting in manufacturing, where he managedplatform companies and refined portfolios.

SENIOR BANKERS

SERVICE OFFERINGS

Mergers & Acquisitions

Sell-side AdvisoryAcquisition Advisory

RecapitalizationsManagement Buyouts

Financing

Capital RaisingPrivate Placements

RefinancingsDebt Financings

Special Situations

Debt RestructuringDistressed M&A

Section 363 SalesAlternative Financings

Advisory Services& Opinions

Fairness OpinionsValuations

Board AdvisoryFinancial Advisory Services

Maury J. BellManaging DirectorMaury J. Bell joined Mazzone

& Associates in 2014 as aManaging Director and Strategic Advisor.

Mr. Bell recently led thePower-Sonic acquisition for The BlackbirdGroup and is subsequently involved in batteryand related product acquisition activities forthe business. He is currently on the boards ofChinada Holdings and M&M Pump andSupply, and formerly on the board of variousother companies.Prior to joining the firm, Mr. Bell served as aManaging Partner of DN Partners, a Chicago-based private equity group. Before joining DN,Mr. Bell headed the M&A group at EVEREN,where he led and completed 25 transactionstotaling more than $1.5 billion.

Mazzone & Associates, Inc. is a mergers and acquisitions advisory firm serving the lower middle market. Our professionalshave advised on and facilitated more than 300 transactions across multiple sectors. The firm’s deep wealth of experience inpackaging has led to more than 40 executed deals in and around the packaging space alone.


MAZZONE & ASSOCIATES

Mazzone & Associates’ professionals have executed over 40 transactions with both private equity and strategic investors inpackaging and related industries. Knowledge of these focus industries runs deep at M&A, as multiple senior bankers at ourfirm have served as owners, operators, and officers of packaging businesses. Mazzone & Associates is able to leverage thistransactional and operating experience to consistently maximize client value, whether on the sell or buy-side. Ourcollective experience spans some of the best known and respected companies in the packaging industry, including thoseshown below.

trends in flexible packaging m a - aimcal · company: mazzone & associates. company profile:...

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