The state of private equity

Over the past year, several large private-equity-backed companies operating in the label space have undergone notable changes.

In August of 2025, Brook + Whittle secured 130 million USD as part of a refinancing transaction.

In November of 2025, plastic materials supplier Klöckner Pentaplast filed for prepackaged Chapter 11 Bankruptcy in the US Bankruptcy Court for the Southern District of Texas and entered into a restructuring support agreement, reducing its debt by about 1.51 billion USD.

In January of this year, MCC entered into a prepackaged Chapter 11 process and restructuring support agreement that eliminated 3.8 billion USD in debt.

In February, Resource Label Group appointed several new C-suite leaders and separated from much of its former senior leadership.

Analysts say these developments are not isolated incidents but part of a broader trend. They note that PE firms may have overpaid for acquisitions, while the label market growth has slowed.

PE in labels

The label industry is an attractive market for PE companies. It offers consistent, low-risk returns, and it’s highly fragmented. Additionally, many label converters are family-owned companies with second- or third-generation owners who may be looking to exit and who may lack a next generation interested in taking over the business.

Generally, when a PE company enters the label space, it buys an initial company, which it then uses as a platform to acquire further businesses, eventually building a network of label converters.

‘Within each private equity firm, there are different cultures, different approaches they take, in terms of how much management, support they give, or how much they leave the acquired company alone, and everywhere in between,’ says Corey Reardon, president and CEO of Alexander Watson Associates, a market research firm. ‘So that varies. A lot of the private equity firms today are good stewards of a business, with the financial objectives of creating a well-positioned, strong business.’

The last 25 years have seen PE companies entering the label space, acquiring both converters and suppliers. The result has been that companies with PE ownership models dominate the pool of the largest label converters.

‘In this slightly expanding pond, the big fish are getting huge, and the small and mid-sized fish are kind of the same,’ says Thomas Blaige, founder of Blaige Industry Analytics. The analytics firm tracks and analyzes merger and acquisition activity across resins, colorants, concentrates, adhesives, sealants, inks and coatings and capital equipment in packaging and converting.

Blaige says that, in the label industry, more than 80 percent of the top 10 percent largest companies have now either sold or merged, while fewer than 20 percent of the small and mid-size companies have done so.

At the same time, consolidation among suppliers has reduced the number of supplier options for converters.

Blaige says that everyone in the industry, especially smaller companies, needs to pay attention to consolidation, as it is easier than ever to be outcompeted by larger businesses.

‘They need to be looking at their competitive landscape, who’s buying who. It’s like musical chairs,’ Blaige says. ‘They need to pay a lot more attention to their external environment in their strategy and follow a novel, creative strategy every year, not just repeat what was done in the past.’

Overvaluation

After 25 years of consolidation in the industry, some large-cap PE-backed label converters are restructuring their debt or making leadership changes.

Blaige says that acquisition prices are rising as converter companies are repeatedly bought and sold by PE firms, leading to overpaying. Blaige emphasizes that this phenomenon primarily affects large-cap companies because they command the highest multiples and take on substantial debt when making acquisitions.

‘It’s like New York real estate,’ he says. ‘Somebody buys a property. It’s a family, and you get the real estate. It’s a humble little thing. Then someone says, “Oh my gosh, it’s a diamond”, so they pay double for it and take out a big bank loan. Then someone says, “Well, it’s a double diamond”. And five years later, they take out an even bigger bank loan. Then someone says, “That’s a triple diamond”. Now, it’s a quadruple diamond. People are paying four times as much as they would have 20 years ago. They’re borrowing all this money, and it’s not working out, and they’re squeezing all the juice out of the lemon each time they buy it.’

Each time a company is acquired, it is evaluated at a higher price, but that doesn’t mean that it’s worth more, Blaige explains.

This phenomenon is not unique to labels; Blaige has seen it in other industries as well. However, plastic packaging is particularly vulnerable to this overvaluation due to the industry’s high degree of fragmentation and its age. In contrast, metal and glass packaging are older industries, so they’re less fragmented with less potential for consolidation.

‘Each private equity group holds for about five years, and then they flip it. It’s like real estate,’ Blaige says. ‘Every time it gets flipped, they’re trying to get a little more, so that by the time you get to the fourth flipper, the price is super high and it’s very risky.’

Complex landscape

Jonathan White, managing director of Mezzo Investment Banking, attributes the financial challenges to a complex array of factors, including occasional overpaying and/or poor management and integration of new acquisitions. White has been involved in investment banking in the packaging space since the mid-1990s.

“The key is that these acquirers need to maintain discipline on buying right and not overpay”

‘Acquisition models had worked very well for a long time within the label space,’ White says. ‘The key is that these acquirers need to maintain discipline on buying right and not overpay. You’ve got to manage right, do the hard work of integration to enhance growth and enhance margin, and you’ve got to be cognizant of where you are within the cycle. If you miss any one of those three things, you may have a problem.’

Some acquirers have paid amounts for label companies that make it difficult to justify the returns that a PE company would need, White notes. Others may not be making the necessary improvements to increase value.

Meanwhile, growth in the label industry has slowed recently, creating a further challenge. White attributes this slowed growth, which is primarily evident in PS and cut-and-stack labels, to the overall stress currently affecting consumer products in developed markets.

White sees PE companies holding onto businesses for longer periods of time before selling than they used to. This is a challenge because PE companies realize most of their returns when they sell businesses, so holding on to them for longer could indicate underlying issues.

‘Sometimes you have a company that’s not performing as well as you would like, so it’s not the right time to take it to market,’ White says. ‘In other cases, it could be that they’re struggling to find the right buyer. Some of the larger roll-up entities started as smaller entities and then serially traded from one private equity group to the next. It starts with a smaller-market private equity group, then trades up to a middle-market group, and finally to a larger-market group. Eventually, you end up with the largest private equity groups. At that point, to whom are you going to sell?’

Reardon emphasizes the market’s role.

‘These companies have been bought with debt, and that debt is manageable at certain market or business conditions, but if that is softer or goes down, then the debt the company has is much harder to service,’ Reardon says.

The US market

Though there has been some overvaluation in the European market, the US market is particularly vulnerable to overvaluation in mergers and acquisitions activity, given the level of PE in the US.

‘There’s more private equity here, so usually it’s more competitive,’ Blaige says. ‘It’s more prevalent in the US because the premiums are higher, so they’re stretching the companies. They’re stretching a little further on these prices. There’s more risk.’

PE interest

Reardon, Blaige and White agree that PE companies are still interested in the label industry.

‘The basic tenets that drew interest to the space are still there,’ White says. ‘It’s still a fragmented, competitive base. It’s relatively low in capital intensity compared to other forms of packaging. It’s one of the smallest percentages of the overall shelf price of a good, so because of that, you tend to make a little bit better margin, because it’s not as noticeable, it’s not worth the investment of your customers to spend a lot of time fighting with you over a half cent. Also, it’s not worth switching; customers can be very sticky, so it’s just not worth the risk of switching suppliers on that. The space is generally resistant to import competition. It’s mainly a local, regional market. None of that has changed.’

According to White, consolidation in the industry peaked around 2021 and 2022. Those years saw 40 and 49 add-ons, respectively, while 2021 saw seven new PE companies enter the label space, and 2022 saw three. Over the last two years, those numbers have dropped to 28 add-ons and four new platforms in 2024, and 23 add-ons and two new platforms in 2025.

‘A little bit of the shine has come off, but it will always be an active market, in my view,’ White says.

AWA analyzes the label market for PE companies looking to enter the space, and Reardon has noticed fewer such companies in recent years.

‘You’re not seeing as many new private equity firms buying into the sector; rather, existing platforms grow through acquisition,’ Reardon says.

Blaige expects PE to continue showing the same level of interest in the label industry, but that the valuation of converter companies will decline.

‘A few people get burned,’ Blaige says. ‘The activity is the same. They just pay less.’