Trends in M&A

The best way to answer this is to review pressing trends. While there are considerations in every segment, there are drivers behind label M&A in general. Here are the top four we saw this year and how they might play out in 2020. Keep in mind that as an election year in the US, new dynamics can dramatically change expectations for M&A and the economy in general.

1. Change. Regardless of industry, the best companies are those that embrace change and adapt. If you haven’t engaged in M&A or made significant capital investments in the past two years, you’re likely behind the curve. Our largely mobile business community expects not only immediacy in service, but also the latest in technologies. If you can’t give your customers access to the best label or packaging solutions, you can’t provide it to an acquirer either. 

Still, increased equipment and material costs have made it harder to keep up. While the majority of 2019 deals went to sellers of highly progressive companies, in 2020 we expect increased interest in targets that need some investment. Certainly they won’t get the multiple of their cutting-edge counterparts, but they should have some good opportunities – as long as they’re adapting to change.

2. Consolidation. The business world at large is developing into the amazon.com society, and the label and packaging  industry is following suit. In addition to working to increase shareholder value, there are continued efforts for companies to become ‘one stop’ suppliers. This aligns more closely with how procurement has shifted (purchasing clerk vs print buyer) and the correlated expectation for convenience and economies of scale. For many businesses, ‘converging’ into new segments isn’t simply for growth; it’s for survival.

In 2020, we expect consolidation to maintain or accelerate its pace. Thus, for smaller entities, it might be wise to search out your ideal acquirer (or strategic partnership) rather than wait for – and perhaps become prey to – other offers. Your ability to help an acquirer fill gaps in capabilities is key, as well as geographic presence. Having a big-name customer is not as attractive as it once was, as the nature of loyalty has changed.

3. Digital. Everything noteworthy in our business has a digital component. Paging through this magazine reinforces that. Digital creates the speed, cost savings, waste reduction and personalized ‘experiences’ demanded by today’s buyers.

Increased investment in digital platforms will further blur the lines between service and cost-efficiencies. Concerns still remain regarding quality, performance and potential downtime in workflow, and most of these will be answered by some aspect of digital.

In 2020, strong privately held companies may be able to leverage their digital command for an even higher EBITDA multiple than we’re seeing now (7-12X). Scrutinize any opportunity closely. The partnership of an experienced M&A advisor is key.

4. Staffing. A focus on STEM majors for college studies has brought about a crisis on the shop floor, in the estimating department and in customer service. Combine that with record-low unemployment, and there are way too few qualified candidates to fill necessary spots. The industry needs to address this waning interest of new recruits. But businesses themselves should be their own advocate.

In 2020, expect to see the innovators recreate roles, introduce more technical-based positions, and revamp platforms to rejuvenate industry enthusiasm. Smart recruitment will become the great differentiator. People make a business. It’s not the marketing tagline or the beautiful plant. The companies with the best hiring, training, and engagement win – in M&A, long-term growth and success.

Outside of these four M&A drivers, there will be a number of other issues reshaping our industry. Perhaps one of the most intriguing is that labels and packaging continue to be used in creative new ways. Our customers are utilizing our products inventively for their businesses’ development. As you examine your own future prospects, take a lesson from this creative thinking. Whether a buy-sell transaction, investment, technology revamp, or simply a tune-up, there are numerous ways you can grow your company.

If you truly analyze your opportunities and solutions, you can achieve the rich potential of your business in 2020 – and beyond. Let me know how I can help.