The market for label companies in Western Europe and North America is consolidating. Every month label companies are sold. A few deals are huge like CCL’s acquisition of Avery Dennison’s Label Converting Business for $500 mio. Most are much smaller, but just as important for the involved parties. One example of the consolidation taking place: In Denmark, 20 years ago we had more than 50 label companies, now there are less than half left. The same scale of consolidation has not yet taken place everywhere, but consolidation is happening. At the same time new label companies start in the emerging markets, so on a global scale the number of label companies is more or less stable.
Will Baby Boomers flot the small business market ?
The label market consists of thousands of small to medium sized companies most of them run by entrepreneurs. In the mature Western Europe and North American label markets these companies are typically 20-40 years old. Time is catching up on the owners and many of them are forced to think about exit strategies.
With Baby Boomers retiring en masse over the next 15 years, a lot of business owners will be heading for the exit not only in the label business, but in many small to medium sized businesses. There are predictions that this will put a damper on small-business valuations, as the supply of businesses will outweigh demand. Business owners should start planning now to position their business for sale in what could become a crowded and competitive marketplace.
Buyers are out there !
On the demand side, there are buyers out there! We have several companies, who are actively seeking to buy label companies. We have observed different groups of buyers in the market.
A prominent group of buyers are made up of label companies with a strategy to expand often within their enduse markets such as pharmaceuticals, beverage or food. The biggest examples are CCL Label and Multicolor , but there are several others with clear growth by acquisition strategies. Some do it within their own geographical areas or as part of a strategy to expand to other parts of the world. A particular group of label company buyers are looking for cheap deals, when ‘colleagues’ run into difficulties and are forced to sell.
Another group of buyers consists of companies from other industries, who want to expand into the label market. They can come from other packaging industries such as Fuji Seal’s acquisition of Pago and Constantia Flexibles acquisition of Spear Group. They can also come from traditional printing, where the market is shrinking and profit levels are lower than in the label market.
Corporate buyers and private equity groups in particular are sitting on record amounts of cash and looking to put it to use through strategic acquisitions and investments.