Industry Overview
This industry includes paper mills, manufacturers of paper and paper products, resin and plastic producers and manufacturers of other plastic products, as well as packaging and stationery products wholesalers. Primary producers in this industry rely on resource suppliers like chemical, petrochemical, and energy and wood pulp producers as well as waste recycling facilities. The industry is in its mature stage and the demand for traditional paper products has already begun to decline due to digitalization and an increasing shift towards online resources. The paper and plastics manufacturing industry has high barriers to entry due to heavy regulation and high capital intensity. The ease of entry is higher for wholesalers and stationery retailers as a result of which players in this sub-industry face higher competition and more pricing pressure. Going forward the demand for both paper and plastic products is set to steadily decline due to environmental consciousness and green initiatives. As governments implement tax incentives for eco-friendly measures, corporations will continue to reduce usage of paper and plastic. The industry will continue to witness high consolidation and automation as players attempt to increase margins through reduced labor costs and synergies.
Industry Drivers
Sustainability – A vast majority of the raw material fibre used to produce containerboard products is recycled from industrial and household consumers. On average, about 66% of raw materials is recycled paper or paperboard. About 20% is from wood chips and wood dust reclaimed from the wood processing industry. Only 14% is from fresh cut trees, according to the Canadian Corrugated Containerboard Association.
Macroeconomic Factors – energy prices, inflation, and overall economic activities can all influence the costs of production and the demand for paper products.
Raw Materials – The paper industry consumes a significant amount of wood from forests, as well as water for its production. With increasing deforestation and worldwide water crisis, proper raw material management is integral for the paper industry.
Selling a Paper, Plastics & Packaging Company
Selling a business in the paper, plastics & packaging industry requires expertise with the business and the industry. As Canada’s leading private market M&A Advisory firm, Beacon understands that selling a business is an important decision. A dedicated business owner not only seeks to extract maximum value from the sale of a business but also seeks to sell the business to a competent buyer who can continue the company’s legacy. Beacon has worked on valuation and M&A advisory mandates in the entertainment industry, bringing extensive experience in deal negotiation to the table. Our experienced advisory team will assist your business in navigating the entire sell-side M&A process.
As an entrepreneur or business owner who is exploring a potential sale, it is important to understand some key factors specific to the paper, plastics & packaging industry that might impact the likelihood of a potential sale. These are factors that determine business attractiveness for potential buyers and investors.
Pricing and Brand Recognition – with little product differentiation, businesses in the paper industry distinguish themselves through competitive pricing, established brand reputation, and niche product offerings.
Cash Flow – the payment cycles can determine the cash flow of the business. For instance, a business that receives upfront payment from customers is likely to be cash flow positive.
Supplier Relationship – Exclusive contracts with key distributors and brands creates a barrier to entry against competitors and allows businesses to exploit higher margins. Contracts and agreements also increase certainty of future sales and reduce dependence on owner’s existing relationships with key suppliers.
With 140 years of combined experience serving businesses within Toronto, Ontario, and abroad, the Beacon transaction team has extensive knowledge and experience successfully working for several paper, plastics & packaging companies from a variety of industries. Whether it be a valuation or sale, our team can provide expertise and resources found only at larger corporations, paired with the personalized touch of our M&A Advisory team. Contact us today to get in touch with one of our advisors.
