Industry Insights: Global Packaging Industry, Fall, 2024
Through September, 2024 has delivered on the hoped-for rebound in volumes of packaging transactions and stabilization of valuations. While certainly not approaching the peak of activity and pricing seen in 2021, the market has overall been healthier than in 2023.
Our key observations for this edition of Industry Insights:
Through Q3-2024, transaction volumes rebounded by 14% over the same period of 2023, roughly in line with 2022 (-2% vs 3Qs 2022). This improvement occurred in Q1 and Q2, which produced the highest quarterly volumes since 2022.
Third quarter volumes, however, softened slightly. Anticipation of interest rate reductions in both North America and Europe likely held some financial sponsors at bay, and the pending election in the US may also be creating uncertainty which is keeping buyers in the wings. We view these as transitory issues and anticipate additional volume growth in 2025.
Segment outperformers (in volume) were the same as noted in our Winter 2024 edition - Machinery & Equipment and Rigid (non-plastic) packaging. Rigid Plastic Packaging also notched an increase in activity. Those segments with lesser activity include Flexibles and Labels.
On a run-rate basis through Q3, corporate buyers, new sponsor platforms, and sponsor add-ons were less active in 2024 versus 2023. The big change was the appetite from private buyers, which is on pace to double activity in disclosed transactions.
On the limited year-to-date sample, it appears that average deal pricing (as measured by EBITDA multiples) stabilized in 2024 after falling for 2 consecutive years, with multiples roughly equal to 2023’s level.
Over the last five years, premium valuations were observed among Flexibles, Machinery & Equipment, and Rigid Packaging (non-plastic); discounted (less than average) pricing was noted among Distribution / Contract Packaging, Paper, and Labels. This has generally held true in 2024 but with some interesting longer-term trends emerging among the segments.
As noted previously, there remain a number of transactions that have been put “on hold.” The economic and political environments are creating uncertainty which continues to weigh on pricing, and if sellers are looking for a return to 9x+ multiples, it appears that they will continue to wait well into 2025+.
