In 2021, Blaige & Company moved into the third decade of its proprietary research on the impact of global consolidation across multiple sectors in plastics, packaging, and chemicals. The company recently released a report that focuses on the label segment of the packaging industry, which is experiencing “an exceptional surge of interest from strategic and institutional investors in 2021.”

The label segment continues to be one of the most active components of packaging M&A transactions in 2021. After a below average deal count of the pandemic-impacted 2020, the Blaige & Company proprietary research indicates a return to the historical average label deal count in 2021 of 45 deals. Representing a nearly 5% increase over the pre-pandemic deal count in 2019 and a nearly 10% increase over the deal count in 2020, the label M&A activity is evidently thriving.

Global transaction multiples are at record levels and expected to remain strong. Buyers have access to large amounts of inexpensive cash and are prepared to invest in M&A opportunities. While the number of label sector M&A deals did not reach prior record levels, the competitive significance of the consolidations experienced in 2021 is “unprecedented.”

The label converting segment analyzed by Blaige is comprised of hundreds of label converters. The segment is made up of primarily small to mid-sized companies, as 85% of converters have annual sales of less than $100 million, with 75% under $50 million. The speed of consolidation in the label industry is gaining momentum in the wake of the post-pandemic recovery, and has impacted all industry participants. As Blaige reports, 72% of the top 50 North American label companies from 2001 have been eliminated or sold over the last 20 years, as opposed to 52% 10 years earlier. Label M&A consolidation has been close to the average of all segments in the packaging industry, leaving a tremendous opportunity for future consolidation. Blaige is projecting for the consolidation of the label industry to reach 80% by 2025.

Blaige & Company has identified two distinct strategies in the label segment M&A: one being employed by large, global consolidators, and the other by domestic, private equity backed consolidators.

Global consolidators are large cross-border market participants, which are publicly funded and often seeking supply-chain vertical integration. Some of the most notable examples include: CCL, Avery Dennison, TC Transcontinental, and Winpak. CCL appears to be one of the most active players, Blaige reports, rapidly expanding its film converting capabilities, aiming at significant economies of scale through backward integration.

TC Transcontinental and Winpak, on the other hand, both historically known as film converters, are avidly entering the label market, broadening their market reach through forward integration. Private-equity funded consolidators are relatively smaller platforms that rely on local and domestic markets. These are label converters that gain scale through add-ons within the label space, without a pronounced taste for vertical integration. Examples of such serial acquirers are Multi-Color Corp., Fort Dearborn Company, Resource Label Group, and Fortis Solution Group.

Signature /Action Packaging (SAP) (a former Blaige & Company client) appears to be an exception in the private equity label universe, where they are expanded from film converting to label converting by purchasing Chromatic Labels. This group may become a trendsetter for many others to follow on this fertile consolidation terrain.

Considering the impact of consolidation on these industry leaders, Blaige believes the impact will be even more significant for smaller, privately held label converters. This accentuates the importance of establishing a detailed strategic plan with the knowledge of subtleties of the marketplace and its numerous trends.