Industry Insights: Global Packaging – Q1 2020
As of this writing, we are in the early stages of “lock down” as a result of the COVID-19 outbreak. While we cannot be certain of either the severity or duration of the impact, it is safe to say that no one in our Industry is immune to COVID-19’s effects.
Upcoming Industry Events
AWA Global Release Liner Conference, February 27-28 (Presentation Available upon Request)
AIMCAL Executive Conference Webinar, April 9
Packaging M&A Webinar, May 18
International Sleeve Label Conference, November 2
PACKAGING M&A OVERVIEW
As of this writing, we are in the early stages of “lock down” as a result of the COVID-19 outbreak. While we cannot be certain of either the severity or duration of the impact, it is safe to say that no one in our Industry is immune to COVID-19’s effects. Anecdotally, within the last two weeks:
A client serving the retail market is adjusting its customer mix as the shift from brick-and-mortar to online shopping accelerates in the near term
An overseas client is deferring strategic acquisition plans until the impacts of the virus become clearer
A packager of household cleaners is enjoying record volumes and is now seeking to acquire capacity
A packaging equipment client is reassessing timing of capital needs following the postponement of an industry conference to 2021
Overall, Packaging should be less impacted than many other sectors of the market, as (i) it is largely a “local business” with relatively less cross-border or cross-region shipping and supply chain reliance, and (ii) large portions serve cycle-resistant markets such as food & beverage, healthcare, and personal care. Given this, we suspect that Packaging – and the transaction market behind that – will rebound quickly as the virus subsides. In the interim, we expect deal flow to slow substantially as uncertainty hinders decision making.
Please note that the following data is largely “pre-COVID-19” – the impact of the virus will largely be exhibited in data beginning in March 2020. Nevertheless, it can be used by Buyers and Sellers to understand underlying transaction dynamics for when the market returns.
Before the onset of COVID-19, Mezzo highlighted three key trends impacting Packaging companies’ performance and transaction prospects in 2020:
A benign raw material pricing environment is providing margin tail winds for many converters. Among plastic resins, most all packaging grades fell meaningfully in 2019, with many grades continuing this trend into Q1-2020. Paperboard and Linerboard inputs, while not witnessing the same level of decrease, generally enjoyed flat to slightly down pricing. A softening demand (COVID-19 impact) and decreased energy/freight prices (OPEC/Russia price war) could prolong this environment. Buyers are intensifying their due diligence to ensure that current margins are sustainable in the event of (a) a rebound in raw material costs, and (b) demands from customers to pass along these cost decreases.
The search for more sustainable packaging options has created uncertainty regarding the future of certain packaging formats, most notably single use plastics. This uncertainty was amplified in 2019 as state lawmakers introduced no less than 95 bills related to the regulation of plastic bags alone. The inconsistency of state and municipal regulation (and the ability to effectively enforce them) has added further confusion to the market. Investors are seeking to understand the full extent of the shift, so that they can identify the winners and losers among various packaging formats.
2019 saw continued high leverage among packaging companies. Among public packaging companies, Net Debt / EBITDA continued to inch up, reaching 3.7x versus its three-year average of 2.8x. Among Leveraged Finance Transactions (LBOs), average leverage exceeded 5.0x among all disclosed US transactions (not packaging-specific). This heightened level of leverage is manageable in an environment with both low interest rates and a growing economy. As the latter is now greatly at risk, highly levered companies may find themselves capital constrained and/or exceeding covenants as we enter Q2 and Q3 of 2020.
DEAL VOLUMES & PRICING
As the graph below illustrates, global transaction volumes among industrial companies entered a decline well before COVID-19. In the previous cycle, the prior deal volume peak (2007) fell by 30% in 2009 but rebounded in 2010, generally following changes in GDP. Our most recent industrial deal volume peak, however, was in 2015. Transaction volumes have since fallen in each year despite an overall growing economy (and before any COVID-19 impact). Packaging resisted from this trend. In fact, deal volumes have grown year over year including a 14% increase in deal volume from 2018 to 2019.
2020’s early volumes indicate that this may no longer be holding. Volumes for the first two months of 2020 are down 30% from 2019 – with this is largely pre-dating any impact from COVID-19. While we suspect that this gap may narrow as more data comes in, we believe that COVID-19 will reinforce this negative trend as we enter March and April. Nevertheless, we believe that Packaging deal volumes will suffer less than overall deal volumes given that Packaging is overall a more recession-resistant segment of industrials.
Pricing (as determined by transaction multiples) increased by a half turn of EBITDA over 2018’s levels, with median multiples of 9.1x EBITDA and 1.5x Revenue for 2019. Factors continuing to support high levels of pricing include accommodative leverage, a high level of interest from both financial and strategic buyers, ongoing consolidation in those segments of packaging which remain relatively fragmented, and the underlying attractiveness of an industry that consistently offers resilient margins and GDP+ growth. The sustained healthy pricing in this Seller’s Market may also have contributed to lower transaction volumes in early 2020, as buyers wait for more conducive deal metrics (a Buyer’s market).
DEAL VOLUME BY TARGET SIZE
There is a healthy market across the spectrum of company sizes, but the greatest activity remains among the smallest companies. Almost two-thirds of disclosed transactions were targets of less than $50 million in revenue, with the majority of these at or below $20 million. While certain sectors such as Glass and Cans have essentially consolidated, there remains tremendous consolidation activity among other sectors, with these smaller tuck-in deals common among paper-based, labels, flexibles, rigid plastics, machinery and distribution companies.
Our analysis indicates that for Pricing, size does matter. Smaller deals (target revenue under $100M) trade at a 1x discount to the overall median of 9.1x. Larger deals, those of targets with revenues above $100 million, trade at a 1x premium (10x+). This differentiation by deal size supports consolidation strategies, as Consolidators seek to arbitrage the multiple expansion to enhance investment returns.
BUYER & SELLER ANALYSIS
Private Equity investors, including both new buyouts and add-ons to existing platforms, accounted for 48% of 2019’s transactions, with Corporate Buyers accounting for 28% and Private Company buyers 24%. These splits are consistent with data from the last five years. We attribute the high participation rate for Private Equity Buyers to:
stable growth and profit margins providing a “defensive investment,”
availability of leverage,
relatively low capex compared to cash generation (particularly in private equity-favored sectors such as Flexibles), and
ability to leverage add-ons and arbitrage size multiples upon exit.
Among Sellers, Private Companies comprised 65% of all transactions, with Corporates and Private Equity splitting the remainder. Private Equity exits are largely to other sponsors, with these secondary transactions accounting for 58% of private equity exits.
As it regards Pricing, 2019 data runs counter to the orthodox view that industry incumbents are better placed to pay higher prices due to their ability to extract synergies from an acquisition. As compared to their corporate and private competitors, financial sponsors pay an additional turn+ of EBITDA, not only for add-ons but also for new platforms. We see this as evidence of their need to deploy capital in a strong seller’s market. The same pricing disparity between Private Equity and other parties exists when the exit their investments, i.e., while Private Equity buyers pay a premium, that same premium exists when they sell (often in secondary buyout to another private equity sponsor).
DEAL MOTIVATIONS
To better understand the drivers for transactions, we identify apparent motivation(s) of the Buyer in Packaging M&A, grouping them into four general categories. The most common motivation is Consolidating Market Share, followed by Product/Market Expansion and Geographic Expansion, and lastly, by Financial (which includes not only Private Equity Platforms, but also IPOs, private investor acquisitions, etc.). Please note that due to multiple potential motivations for a given transaction, the total exceeds the 270 transactions noted for 2019.
The highest valuations include those driven by Financial Motivations (as echoed in our Buyer Analysis for Private Equity acquisitions) and in Product/Market Expansions, which we interpret as the most compelling strategic transactions. Those sectors seeing the most consolidation activity are the Paper, Flexibles, Distribution, and Labels sectors.
SUMMARY
Overall, volume and valuations remained robust in the Packaging M&A space through the end of 2019. Furthermore, several transformative acquisitions have closed/are anticipated to close in 2020:
In Rigid Plastics, Clearlake’s secondary buyout of Pretium Packaging from Genstar Capital
In Flexible Paper, Hood Packaging’s acquisition of TC Transcontinental’s Paper & Woven Polypropylene Packaging operations
In Rigids + Flexibles, Liqui-Box Holdings (Olympus Partners) acquisition of DS Smith’s Plastics Division (as well as the acquisition of certain Rapak operations by TriMas as a regulatory condition of Olympus’ transaction)
In Folding Cartons, Graphic Packaging Holding’s pending acquisition of Greif’s Consumer Packaging Group
In Flexibles, Partner’s Group pending secondary buyout of Schur Flexibles from Lindsay Goldberg
In Rigid Plastics, Silgan’s pending acquisition of Albéa’s Dispensing Business from PAI Partners
In Other Rigids, the pending acquisition of Owens-Illinois Australian and New Zealand operations.
Through 2019 and into early 2020, we continued to see sustained interest in the packaging industry from both strategic and financial investors, as buyers seek to consolidate segments and diversify geographies, markets, and technologies. While the current environment is unsettled, we believe that the underlying trends in in the Packaging space will bring acquirers back to the market as soon as later this year.
NOTEWORTHY TRANSACTIONS
Mezzo was previously known as Mazzone & Associates.
ValorBridge Partners: Efficient Long-Term Capital for the Middle Market
We are hearing that businesses and their owners (from large cap corporates to family founders) are seeking quieter, less-public solutions to achieve their time-sensitive capital needs and objectives.
We are hearing that businesses and their owners (from large cap corporates to family founders) are seeking quieter, less-public solutions to achieve their time-sensitive capital needs and objectives. Mezzo has worked with ValorBridge Partners for almost a decade and is ready, able and willing to help middle market business meet those needs and objectives.
ValorBridge is a long-term investor with over $500 million in assets and significant liquidity across diverse industries. Among its current portfolio of companies are:
ApolloMD, a healthcare service provider focused on hospital emergency rooms;
Crown Asset Management, a financial services business; and
Guardian Fueling Technologies, a provider of turnkey solutions for the fuel distribution industry.
ValorBridge has invested everywhere on the balance sheet from senior debt to mezzanine debt to equity. We focus on the right capital for the business to success and grow, then price the capital to align management with ValorBridge to deliver returns for both as management meets its goals and objectives. All ValorBridge companies are protected with barriers to entry for competitors and have strong management teams.
Please reach out if you are seeking liquidity or structured solutions for debt or equity positions and wish to transact directly and discreetly with an agile, no-nonsense long-term investor. We take great pride in our reputation for speed and certainty despite the current environment, just as we did during the Great Recession.
No one can accurately predict what lies ahead, but we feel the ultimate winners that will emerge from this are the companies and investors that shift the paradigm to prioritize: liquidity, adequate capital bases, and reasonable debt profiles. These three things, along with operational resources that provide some sort of path back to normalcy, will allow us as a nation to successfully emerge through this crisis. ValorBridge and Mezzo intend to lead the way for middle market companies trying to navigate the current storm.
With this unprecedented crisis, much is required of us as a society to address the risks of COVID-19. We must all work together as we traverse through this situation. Please take care and let us all do our part to limit the spread of COVID-19.
Dom Mazzone
Managing Director
Mezzo was previously known as Mazzone & Associates.
Mezzo Advises R. Lee & Associates and Blue Point Capital Partners on the Acquisition of Country Pure Foods
Raymond (“Ray”) Lee, Managing Member of R. Lee & Associates, formerly served in a number of leadership roles at Country Pure, including CEO. He will return to serve as CEO of the Company post-closing, bringing a wealth of executive and industry experience. Reflecting on the transaction, Ray Lee noted, “I’m eager to build on the Company’s outstanding reputation while developing new opportunities to increase product consumption. Mezzo provided excellent guidance and advice as we navigated the complexities of the transaction process.”
Mezzo is pleased to announce that it acted as the exclusive financial advisor to R. Lee & Associates and Blue Point Capital Partners (“Blue Point”) with respect to the acquisition of Country Pure Foods, Inc. (“Country Pure” or the “Company”).
Raymond (“Ray”) Lee, Managing Member of R. Lee & Associates, formerly served in a number of leadership roles at Country Pure, including CEO. He will return to serve as CEO of the Company post-closing, bringing a wealth of executive and industry experience. Reflecting on the transaction, Ray Lee noted, “I’m eager to build on the Company’s outstanding reputation while developing new opportunities to increase product consumption. Mezzo provided excellent guidance and advice as we navigated the complexities of the transaction process.”
John LeMay, a Partner with Blue Point commented, “We are thrilled to partner with Ray and the management team to grow an already clear leader in the better-for-you beverage space. Mezzo proved to be an invaluable advisor throughout the deal.”
Maury Bell, Managing Director at Mezzo, noted, “Country Pure is a market leader in its category and Ray Lee is a world class operator. We were honored to assist him and the Blue Point team with the transaction.”
Country Pure Foods, Inc. is a leading provider of branded and private label beverage products to healthcare and education markets as well to leading grocery retailers. For over seventy years, Country Pure has been a value-added producer, processer, packager, and distributor of both branded and private label beverages and juice products to the food service, retail, and co-pack end markets. The Company sells its products directly to retailers and through institutional food service distributors into the healthcare and education markets. Based in Akron, OH and with five plants across the U.S., Country Pure has a large geographic footprint to service its diverse portfolio of customers.
Blue Point Capital Partners is a private equity firm managing over $1.5 billion in committed capital. With offices in Cleveland, Charlotte, Seattle and Shanghai, Blue Point's geographical footprint allows it to establish relationships with local and regional entrepreneurs and advisors, while providing the resources of a global organization. The Blue Point partner group has a 21-year track record of partnering with companies in the lower middle-market to facilitate growth and transformative change. It is one of only a few middle market private equity firms with a presence in both the United States and Asia, which provides a distinct advantage for its portfolio companies. Blue Point typically invests in businesses that generate between $20 million and $300 million in revenue.
Mezzo was previously known as Mazzone & Associates. Transactions completed prior to April 2026 were executed under the Mazzone & Associates name.
Mezzo Advises H&W Printing, Inc. on its Sale to Crown Capital Investments
“H&W is a great company and our families are thrilled with the acquisition,” said Christopher Graham, CEO of CCI. “We focus on investing in well-established, market-leading companies and helping them optimize operations, innovate, and grow. The brand, the plant, technology capabilities, and the management team all demonstrate the high-performance attributes we seek within our portfolio companies.”
Crown Capital Investments (“CCI”), a private family office investment firm, has announced its acquisition of H&W Printing, Inc. (“H&W” or the “Company”), a Marietta, Georgia-based provider of full-service marketing solutions.
Mezzo, as the exclusive financial advisor to H&W, conducted a tailored marketing process to identify prospective buyers that were uniquely suited to partner with management in generating additional growth and success as the Company transitions into new ownership.
Sarah Gossett, President of H&W, opined, “H&W is infused with an entrepreneurial spirit that has propelled us from our humble 1996 print shop beginning to today’s corporate brand projector and marketing production powerhouse operating 24/7.” Ms. Gossett expressed her satisfaction with the transaction when she reflected, “We’re excited to be associated with Crown Capital. They were a natural choice for a management partner to enhance our growth and optimize performance in the corporate marketing support space. Mezzo worked efficiently and expeditiously to lead the transaction to a close by year-end.”
“H&W is a great company and our families are thrilled with the acquisition,” said Christopher Graham, CEO of CCI. “We focus on investing in well-established, market-leading companies and helping them optimize operations, innovate, and grow. The brand, the plant, technology capabilities, and the management team all demonstrate the high-performance attributes we seek within our portfolio companies.”
Jonathan White, Managing Director at Mezzo, highlighted, "For over 20 years, H&W has been a flagship example of business innovation and adaptability. We fully anticipate that the tenacity, savvy, and industry expertise of Ms. Gossett's management team, coupled with CCI's established history of successfully vitalizing and streamlining business operations, will facilitate H&W's emergence as a national powerhouse in the corporate brand marketing space."
H&W Printing is a Marietta, Georgia-based provider of innovative, full-service marketing solutions. Since its founding in 1996, the Company has fully integrated its service portfolio to become a true one-stop provider of digital and physical marketing solutions, serving an array of Fortune 500 customers across a variety of end markets.
Mezzo was previously known as Mazzone & Associates. Transactions completed prior to April 2026 were executed under the Mazzone & Associates name.
Mezzo Advises Crown Asset Management on Securing Second-Lien Financing
Mezzo advised Crown Asset Management on securing second-lien financing, supporting the company’s continued growth and refinancing of its credit facilities.
Mezzo is pleased to announce that it acted as the exclusive financial advisor to Crown Asset Management in securing second-lien debt financing from Angelo Gordon and Metronome Financial. As part of the transaction, Crown also refinanced its senior and subordinated credit facilities.
Brian Williams, CEO of Crown, expressed his thoughts on the transaction by stating, “We are excited to partner with Angelo Gordon and Metronome to continue growing our business. We are grateful to Mezzo for their help on this process. They have been an integral part of our Crown team for almost a decade.”
Dom Mazzone, the Managing Director who led the transaction, noted, “Crown is one of the most professional, well-run companies we have worked with, and we were honored to advise them on this transaction.”
About Crown Asset Management
Crown Asset Management is a specialty finance company based in Atlanta, Georgia that acquires charged-off accounts receivables. The Company has purchased approximately 500 portfolios, including credit card portfolios, automobile debt, consumer loans, marketplace lending, judgments, and specialty portfolios. Crown has been designated a Certified Professional Receivables Company by the Receivables Management Association International.
About Angelo Gordon
Angelo, Gordon & Co., L.P. is a privately limited partnership founded in November 1988. The firm currently manages approximately $34 billion with a primary focus on credit and real estate strategies. Angelo Gordon has over 515 employees, including nearly 210 investment professionals, and is headquartered in New York, with associated offices elsewhere in the U.S., Europe, and Asia.
About Metronome Financial
Metronome is an investment firm that seeks partners in specialty financial asset investments, such as consumer receivables, healthcare receivables and niche consumer loans (performing, semi-performing and non-performing). The firm’s ability to analyze opaque assets and structure tailored facilities allows it offer creative solutions that extend beyond traditional bank financing.
Mezzo was previously known as Mazzone & Associates. Transactions completed prior to April 2026 were executed under the Mazzone & Associates name.
Mezzo Advises CWI Alabama on Acquisition of Permitted Landfill Site
Mezzo advised CWI Alabama on the acquisition of a permitted landfill site, supporting strategic market entry and long-term development.
Mezzo is pleased to announce it advised CWI Alabama, LLC on its acquisition of a permitted solid waste landfill site. Stuart Sanford, Vice President at Mezzo, led the transaction on behalf of CWI, facilitating both deal execution and sourcing of capital.
CWI Alabama, LLC, an affiliate of Atlanta-based CWI Enterprises, has acquired an existing and permitted 162-acre construction demolition and industrial waste landfill in Western Colbert County, Alabama. The site is located between the TVA Colbert Plant and the Barton Industrial Park in western Colbert County. CWI Enterprises is led by waste industry veteran Steve Witmer. "The Mezzo team’s ability to execute this transaction with integrity paired with their knowledge of the industry drove significant value to CWI Alabama’s stake holders,” Mr. Witmer said of his experience working with Mezzo. “Their ability to troubleshoot a complex acquisition led to a successful transaction for all parties.”
Construction and development of the site will begin immediately and CWI Alabama expects it to be operational by March 1, 2018. The landfill will be constructed and lined in accordance with federal and state regulations. “We are excited to make this market entry after having worked on the project for two years,” Witmer explains. “We look forward to being a responsible environmental services company to our local and regional neighbors and customers.”
CWI Alabama plans to modify the site to better utilize efficient landfill design and expects the site to have a useful life that will exceed 50 years. CWI will market the landfill to municipalities, as well as commercial and industrial customers. The site is currently operated as the Cherokee Industrial Landfill.
About CWI
CWI Enterprises has more than 20 years of experience as an owner and developer of landfill projects. The company developed the White Oaks Landfill in Monroe, LA after purchasing the landfill in 1999. CWI acquired Delta Disposals in 2004, which was integrated with White Oaks Landfill. By 2010, CWI had established long-term disposal contracts with the cities of Monroe and West Monroe, LA and was providing waste collection services to more than 14,000 residential, commercial, and industrial customers. The business was sold to a large national consolidator in 2010. In addition to the Monroe project, CWI has permitted and developed several oil and gas disposal assets in the southeast as well as four wetland mitigation banks.