Debt markets are driving up multiples for companies that make product packaging. Activity in the sector has been constant in 2014. Targets have included Mauser, which makes drums for transporting chemicals, and Pretium Packaging, which manufactures plastic containers. As the trend continues, driven in part by easy access to capital, multiples have swelled for companies that may not be in the top tier.

Packaging acquisitions are generally attractive to investors, according to Frank Winslow, a partner at Charlottesville, Virginia-based private equity firm Quad-C. “People view it as low downside,” Winslow says. The firm sold Technimark, which manufactures custom rigid packaging, to private equity firm Pritzker Group Private Capital in April for an undisclosed amount. According to Winslow, the sales process was very competitive.

“Now that interest rates have been low for years, just on straight finance your multiples are up,” says Quad-C senior partner Stephen Burns.

As buyers’ access to low-cost debt continues, competition for packaging businesses has heated up because now acquirers can pay more. “Lenders love packaging,” Winslow says. “A number of lenders were interested in Technimark.” Before Quad-C sold the business, it had recapitalized the company and changed Technimark’s loan from an asset-based loan to a cash loan.

Top-notch packaging companies are generating multiples of 8.5 to 9 times Ebitda, compared with multiples of roughly 6.5 times Ebitda a few years ago.

Private equity firms are also feeling pressured to deploy capital, according to Ken Hanau, managing director of private equity firm 3i North America. “You’re seeing multiples sky high because of that,” Hanau says. “The debt markets are completely driving this, and private equity isn’t helping because of the oversupply of capital.”

2014 has hosted a slew of packaging deals. Most recently, O2 Investment Partners LLC and Midwest Mezzanine Funds made a controlling investment in Packaging Concepts & Design Inc., a Troy, Michigan-based delivery management service.

In June, Bain Capital bought Envision Plastics and Ecoplast Corp., two plastic recycling companies, to add to Consolidated Container Company, its packaging platform. Terms of the deal were not disclosed.

Before that, in May, private equity firm Clayton Dubilier & Rice agreed to pay about $1.7 billion for packaging company Mauser Group, which manufactures plastic and steel drums for the chemical, industrial and food and beverage industries.

Private equity firm Genstar Capital LLC made a deal, also in May, for Pretium Packaging LLC, which  manufactures plastic containers for the food and specialty beverage, private label, pharmaceutical, personal care and household sectors. Genstar plans to pursue investments and strategic acquisitions to expand the company’s product capabilities and enter geographies, the firm said in a statement. Terms of that transaction were also undisclosed.

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