The new dynamics of M&A

Label and packaging businesses must stay agile and be able to capitalize on a prime M&A opportunity when it comes along.

Labels and packaging have been a boon for M&A over the last decade. Fragmentation, local/regional competition, innovation, customer demand — and, of course, high margins — created opportunities not seen in other similar-sized industries. Private equity (PE), strategics and entrepreneurs all got in on the action, adding girth, territories, capacity and more that have afforded notable value creation and success.

M&A drivers have now changed. The abundance of transactions — both large and small — has created an entirely new landscape. Different factors are needed to compete, so different factors need to be considered for growth. To complicate matters, with the number of acquisitions completed in the US and European Union over the past 10 years, there are few remaining independent targets.

“The plays being made now will go beyond scale, geographies and end-market focus and be more about creating formidable and specialized entities”

Entrepreneurs must understand these shifts and how they affect the way they run their businesses for the future. Every owner at some point either acquires and builds, or divests their company. And sometimes, you may need to act quickly. So, it’s important to keep your organization up to date and in synch with current dynamics.

While not as fast-moving, labels and packaging M&A activity continues to be strong, as the industry remains attractive to investors. But the plays being made now and in the next few years will go beyond scale, geographies and end-market focus and be more about creating formidable and specialized entities.

The ‘new label majors’ will pursue acquisitions and divestitures by what they perceive are the next critical, high-profit opportunities. And we’re already seeing this in play. New deals are being prepared with a greater focus on operations and market concentration.

Here’s a little about what you should expect in these two areas:

Operations, finances and management

PE and strategic buyers are scrutinizing every deal to ensure that any acquisition has the resilience to navigate economic, regulatory and customer headwinds. Specifically, they’re looking at:

Refinancing debt — How might your leverage impact future profitability? What are the rates, terms and provisions of encumbered debt — and what can be equitably managed or refinanced?

Capital expenditures — What is the state of your equipment assets and what is needed to fulfill the future vision? Length and strength of leadership — What are the tenure and skillsets of your top management team? Are the right individuals in place?

Overall market story — Prospects become customers based on your story. How do you bring your message to market (direct sales, agents, distribution, internet, social media, etc), and what is the net cost to do so? More important, how valuable is your brand?

Market concentration and specialties

An acquisition must bring more than accretive revenues. Investors will favor enterprises that have unique capabilities, equipment or market expertise that differentiates you. These include:

Pharmaceutical/healthcare — Healthcare (especially pharmaceutical) label spending has continued to grow, with increasing demand for pressure-sensitive labeling that allows traceability, fraud protection and brand recognition. Top acquisition candidates will be well-positioned in this venue, with both the regulatory savvy and equipment to respond.

Food and beverage — Rising demand for consumer goods products and increased demand for product authenticity and uniqueness are driving demand for primary labels in the market. Both mainstream and private-labeled products are expected to see a surge in coming years, and those suppliers that can help them differentiate will win.

Sustainability — Environmental friendliness is an enormously powerful movement that is driving significant new approaches in manufacturing. Investors will be looking at every acquisition in this regard, favoring those with a compelling sustainability proposition (e.g., linerless labels, carbon labeling/Carbon Trust certification, alternative energy use, recycling, etc).

Extended content, traceability, anti-counterfeiting, etc. — Extended content, RFID, barcoding and other measures have finally come of age and will become increasingly important as we navigate new supply chain restrictions, regulations, consumer concerns and global expectations.

Digital technology — Finally, and importantly, well-positioned labels and packaging companies will have both the digital capabilities and following to answer future demand. How does digital fit your customer base?

The labels and packaging industry is no longer driven by savvy entrepreneurs who took an idea and made it a business. It is now propelled by investors looking for a return better than they can get from other investments. This focus will bring about new consolidation strategies that leverage the aforementioned thinking and acumen.

Labels are mission-critical products that typically do well in both bad and good economic times. Even as we grow into a global marketplace, there will always be an opportunity for independent owners. But every great company still needs to map out a great future. Part of that is staying agile and being able to capitalize on a prime M&A opportunity when it comes along.

Bob Cronin is managing partner of The Open Approach, an M&A consultancy focused exclusively on the world of print. In addition to spearheading several large labels and packaging industry transactions, the firm handles value-enhancement, due diligence, industry trend analyses, and exit planning. It is one of the most tenured agencies in this space.

To learn more about The Open Approach, visit, email Bob Cronin at, or call or text 630-542-1758.

Bob Cronin

Bob Cronin

  • M&A columnist