Packaging M&A review: Winter 2023

Consumers, regulators, and business customers are driving producers (FMCG and otherwise) to do the right thing for the planet.

In 2023, this put innovative firms in hot demand from trade buyers and financial investors. Year-on-year packaging deal volumes were up by 25%, compared to a 26% fall in M&A activity across all sectors, according to our data analysis from Mergermarket, Orbis M&A and Trade Press.

There were 38 UK packaging transactions during 2023, an equal number to 2021 - a significantly more buoyant M&A market.

2023 deal volume

_{Source: Mergermarket, Orbis M&A and Trade Press}

Volumes were remarkably consistent across 2023 (Q1:9, Q2:9, Q3:10, Q4:10), indicating steady confidence in the sector.

_{Source: Mergermarket, Orbis M&A and Trade Press}

The relatively strong year for packaging M&A activity reflects the need of both domestic and international trade buyers to acquire capabilities linked to innovation, alongside access to new markets and customers. Activity was also underpinned by capital provided by financial investors to support continued innovation in the sector.

Trade versus financial investors

_{Source: Mergermarket, Orbis M&A and Trade Press}

Financial investors were involved in 29% of packaging deals in 2023, compared to 20% in 2022.

A key investment theme was the support provided to early-stage growth companies specialising in environmentally friendly manufacturing materials and technology.

Circular materials

In October 2023, Indico Capital Partners led a £2 million seed round to invest in FlexSea, a seaweed-based biomaterial start-up. One of its products, FlexSeable Film, is marketed as a plastic alternative that composts naturally in 8-12 weeks and is processable on standard industrial equipment.

Green manufacturing

In May 2023, Singapore-based impact fund ABC Impact and sustainable chemical company Indorama Ventures led a £20 million Series B funding round in UK-based Polymateria. Its biotransformation technology can be applied to plastics at the point of manufacture to ensure they break down safely if they escape into the environment.

New business models

In July, Edinburgh-based angel investment syndicate Equity Gap acquired an undisclosed stake in Interpac, a technology that enables box makers to self-manufacture cold corrugated boards. The company promises to save businesses 25% on costs and achieve energy savings of up to 90%.

Cross-border activity

In addition to direct investment, private equity backed portfolio companies also sought to enhance their position in the UK, with Dutch investment firm Waterland leading the way with the acquisition of three UK firms through its European portfolio companies: Carton Group bought Wrapology, while Asteria Group acquired both Compliance Labelling Solutions and Berkshire Labels.

This demand for UK skills, innovation, and capabilities was further evident more broadly during 2023, with inbound investment driving the majority (61%) of transaction activity.

_{Source: Mergermarket, Orbis M&A and Trade Press}

Grant Thornton deal

In August 2023, French global packaging group Autajon made its first foray into the UK with the acquisition of Simply Cartons, which has a strong focus on luxury goods. This was swiftly followed by the buyout of self-adhesive specialist Royston Labels in November 2023.

The two acquisitions form part of Autajon’s global ambitions to build an end-to-end presence in local markets. We provided Autajon with financial due diligence for both deals.

Carton Group buys Wrapology

In October 2023, the Waterland-backed Carton Group acquired Wrapology, a UK specialist in sustainable luxury packaging, focused on brand building, design, and high-quality materials.

The Carton Group aims to become a leader in the European packaging industry through organic growth and targeted acquisitions. The deal increases its capabilities to serve Wrapology’s customer base of high-profile international brands. In turn, it offers Wrapology a route to expand into different geographies.

SCG Packaging buys Law Print & Packaging Management for £10.7 million

In November 2023, a subsidiary of Thailand-based SCG Packaging acquired UK-headquartered Law Print & Packaging Management, which had been trading independently for two decades.

Based in Stockport, Law specialises in flexible packaging for pet food and care, sports nutrition, and food and beverage. The deal helps drive SCG Packaging’s expansion into the UK and has enabled Law to expand its portfolio to include flexible pouches and bags, rigid trays and pots, and more.

Four themes driving the need for innovation, underpinning continued packaging M&A in 2024

1 Plastic Packaging Tax (PPT)

In April 2024, PPT is set to increase in line with inflation. Companies that need packaging must choose to absorb the tax as a cost of trading or invest in a more sustainable business model.

2 Extended Producer Responsibility (ERP)

In the UK, organisations that supply or import packaging must comply with ERP, which means reporting their packaging data and recycling activity. The framework was phased in throughout 2023, but businesses of a certain size will have to pay ERP fees from 2025.

3 Consumer pressure

Large weather events, flooding, and water shortages continue to sharpen consumer focus on sustainability. Consumer pressure has already inspired supermarkets, such as Tesco and Sainsbury’s, to replace plastic packaging on items such as tissue and toilet roll, and we expect to see this trend continue to spread across the FMCG sector in 2024.

4 Evolving frameworks regulation

Constantly evolving climate-related reporting frameworks and regulations are causing companies to place every element of their operations under close scrutiny, including packaging.

In 2023, the packaging sector bucked the trend amid a significant overall decline in M&A. The strong demand for more sustainable products and solutions underpinned by regulatory drivers, buyer preferences and the consequent drive for innovation remains and will drive deal activity into 2024 and beyond. 

For more insight, guidance and advice, get in touch with Nick Gillott.