Global advisory firm Stout has released its plastics industry update for Q1 2020, noting that plastics industry M&A transactions for the first quarter were in line with the average despite the COVID-19 pandemic. A decline in M&A activity is anticipated, however, due to declining company performance and challenging logistics surrounding transaction due diligence.
From a buyer’s perspective, while equity capital remains available, many of the equity capital sources will likely be sidelined until the long-term economic impact of the pandemic crisis is known. Credit markets are currently disrupted, possibly decreasing the availability of debt financing. Stout predicts a rise in special situation transactions involving struggling companies.
Key themes for the quarter include disruption of business and society due to the crisis, a strong first quarter for plastics industry M&A but anticipated headwinds for the remainder of the year, buyers with capital to invest though some groups may be sidelines for the near-term, a low capital cost for transactions, an increase in special situation M&A, financial performance disruption for the industry with consumable medical and consumer verticals faring better, historic declines in the stock market and for crude oil pricing, possible downward pressure on some resin prices, and depressed consumer confidence and unemployment negatively impacting key macroeconomic indicators.
The update discusses highlights from Stout’s proprietary M&A database, including buyer and seller trends, end market activity, activity by process and activity by geography. Market trends analyzed include plastics industry multiples, commodity prices and macroeconomic metrics.
For more information, visit www.stout.com/en/insights/industry-update/plastics-industry-update-q1-2020.