MOSCOW (MRC) -- There are steps that plastics business owners can take to keep the mergers and acquisitions parade rolling into 2015, said Plasticsnews.
M&A pros Deborah Douglas and Rick Weil tackled this topic at the 2015 Plastics News Executive Forum, Feb. 4-6 in Lake Las Vegas. Douglas is managing director of the Douglas Group in St. Louis. Weil is managing director with Mesirow Financial in Chicago. "Private business owners do a great deal of good for this country," Douglas said. "They deserve to win, and that’s what we help them do."
She added that although selling a business "can be traumatic" for business owners, it can also create "tremendous opportunities." "There are more buyers than ever before," Douglas said. “But owners face a lot of trauma when they sell. We had one owner recently sell for USD32 million when he had an offer for USD35 million, because he thought the lower deal would be better for his people."
Weil cited a Deloitte survey that said almost half of mid-market firms — with annual sales between USD50 million and USD1 billion — said they were likely to buy another company in the next year. Mega deals of USD5 billion and up also could be returning to the industry, he added.
"There’s so much information out there — companies are asking who do we go after and how much are we willing to spend," he said. Douglas listed several characteristics that could enhance the value of a plastics firm, including strong gross margins, steady growth, patented products or processes and powerful second-tier management.
"Buyers want people with some kind of skill that the competition can’t match," she said. When seeking a buyer, it also helps to have customer contracts up to date and to have non-compete agreements in place with your employees. Possible detractions from making a deal include being dependent on a single customer, lack of a niche focus and a need for major equipment improvements, Douglas added.
Weil cited Novolex as an example of a recently successful plastics M&A deal. Chicago private equity firm Wind Point Capital assembled Novolex from plastics packaging firms Hilex Poly, Duro Bag, Fortune Plastics and Packaging Dynamics. "It’s remarkable to see what [Novolex] has put together and what they’re going to do in the next couple of years," he said.