Label Companies for Sale.com
  • Welcome
    • Marketplace
    • Valuations & Teasers
    • News Alerts
  • Companies for Sale
  • Companies Wanted
  • Who we are
    • Who we are
    • Terms of Use
  • Contact us
  • Partners
  • News Blog
  • Privacy Policy

Buyers are out there....

1/8/2013

0 Comments

 
The Market for Label Companies       

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.
0 Comments

One Billion Dollars Invested

2/4/2013

5 Comments

 
The 4 largest acquisitions ever in the label industry are unfolding right now. Two acquisitions made by the leading label companies CCL Label and Multi-Color and two by large companies from industries offering alternative decorating technologies Fuji Seal and Constantia Flexibles:

2011: Multi-Color acquired York Label Group to strengthen their position in the Home and Personal Care, Food, Wine and Beverage markets in North America for a price of $356 million in assumed debt, stock and cash for a turnover of $240 million, 12 plants and 1.200 employees.

2012: Fuji Seal bought all shares in Pago Holding AG in Switzerland to strengthen their position as a global supplier of sleeves, labels, flexible packaging and application machinery for a cost of CHF 121 million for a turnover of CHF 180 million, an EBITDA of 3.2 mio and about 900 employees.  

2013: Constantia Flexibles Group, headquartered in Vienna, Austria, a leading flexible packaging group, has announced the acquisition of Spear Group focused on labels for the beverage industry.  Spear has sales of approximately US$ 195 million with 650 employees located at four facilities in North America, Wales, South Africa and a sales office in Singapore. Spear has also a growing business of  re-sealable products primarily for the food and snack markets. Purchase price has not been disclosed.

2013: CCL Industries has announced the acquisition of the office and consumer products, and designed and engineered solutions businesses of Avery Dennison on a debt free basis for US$500 million cash. The two businesses had combined revenues of approximately US$910 million with an estimated adjusted EBITDA of US$110 million in the calendar year of 2012. This acquisition is the largest in CCL’s history and takes the company’s pro-forma annual revenue above $2 billion for the first time.

Both 2013 transactions require regulatory approval. Traditionally label companies were much, much smaller than most of their customers and suppliers. This is now changing with these acquisitions. The merged companies also achieve global foot prints to meet the demands of global brand owners for global sourcing of all relevant decorating technologies. Resources will be available to invest in technology, people and a global supply chain. However, many acquisitions are not successful. The challenge remains to stay customer focused and flexible while successfully integrating these big label companies.
5 Comments

Tips to Sell Your Label Business

8/2/2013

0 Comments

 
You only sell your business once. It is important to be well prepared when you want to cash in on your years of hard work. Although every transfer of business ownership is unique, there are some key elements  you need to consider. The sooner you start thinking about an exit strategy and make
a plan, the better. We have collected some tips that we find useful:

1. Sell at the right time for the right reasons

You get the best price when the market is up and your sales and profits are good, stable or even increasing. Selling a company takes time. There may be things you want done, before you put your company up for sale. The sooner you start planning, the better. 

Many owners wait too long because of a lack of planning for a sale, emotion or unrealistic price expectations. Here are a few indicators that it is time to sell: You loose your motivation, your health is deteriorating, you are no longer inclined to invest or engage in new projects, you feel its time to spend more time with your family or on other things in life. Buyers always ask and judge the reason for a sale as they want to preempt hidden issues or trouble ahead. 

If you are more owners, it is important you all agree. You get the best value when you offer 100% of your company.

2.  Determine what you are selling 
 
There are basically two ways of selling – the legal company (limited or incorporated) with everything, assets and liabilities – or only the assets including the physical assets, goodwill, customer lists, etc. Some buyers prefer an asset purchase as it prevents them from taking over any hidden liabilities in the company. 

Real estate is another key factor to consider. If you own the land and buildings, you will often not get the market value of the real estate. Many owners therefore rent or lease the buildings to their label company. We recommend you consider to offer your company with an option for the buyer to in- or exclude land and buildings.

Are there any other restrictions you want to impose ? Some owners do not want to see their company moved to another location. However, the more restrictions you put up, the fewer potential buyers we will find.

3.  Sell at the right price and get paid

There are many ways to determine a fair market value. See my blogs on that subject. You may want to get a professional valuator to determine the value of your company. We can help with typical valuations in the label industry. However, at the end of the day, what counts is what buyer and seller can agree in terms of price and how it is paid / financed. Some deals are fully paid in cash, other deals  are more complicated with buyers making a down payment in cash and then pay some or all of the remainder in installments. The outstanding amount could be dependent on pre-determined criteria such as sales and profit numbers. Other buyers offer stock in their company. A willingness to be creative with the terms can go a long way toward a successful sale.

4.  Get your house in order

Take the buyers view. Assume he will find problematic areas and that eventually all will be discovered. Ensure neat, clean, attractive surroundings, keep machinery well maintained, clarify agreements and contracts, settle minor disputes, update relevant records, get your books in order, etc. Serious buyers want to buy well-run businesses, not neglected ones.

5.   Get professional help

We can help you to find serious buyers. Once they are on the scene, the process of negociations, signing of letter of intent, due diligence and final closure can start. As you proceed in your sales process you will need at least a professional lawyer and a certified accountant with experience in M&A on your team. 

6.  Brace yourself

Selling a business is serious business, so you want to make sure you take the time and trouble to do it right. It can be a long and hard journey, but one with a very tangible and rewarding light at the end of the tunnel. Once you’ve successfully sold your business, savor an accomplishment that not every entrepreneur gets to enjoy. Whether you’re lying on the beach, retiring by the lake or starting your next venture, you did it!!
0 Comments

Learnings from Packaging M&A Forum

27/4/2012

3 Comments

 
The Alexander Watson executive Merger & Acquisition forum in Chicago offered lots of interesting learnings for buyers and sellers of  label companies. Here are some of them: 
       
The positive trend since the bottom was reached in 2009 continues with more and more Mergers and Acquisitions happening in the packaging industry. 
        
Multiples of EBITDA (Earnings before Interest Taxes Depreciation and Amortization) is a key measure for quick valuations in the packaging  industry. See my blog from February for more information. For companies with  critical mass, continued growth and a positive outlook EBITDA multiples of 6-6.5 for financial transactions and about 7 for strategic acquisitions are often being paid. 
        
Our experience is that for label companies, who mostly are smaller and do not have the critical mass, typical multiples realized are 3-5, in exceptional cases 6.
 
My recommendation is to take advantage of  the positive trend and start preparing for selling your label company. Even more so, if you experience profitable growth. Do not wait till you are forced to sell. We have many serious buyers looking to acquire label companies around the world…… 


3 Comments

Join me at the AWA M&A Seminar in Chicago

16/3/2012

0 Comments

 
Join me at the Alexander Watson Associates (AWA) M&A Executive Seminar in Chicago April 16. Download the program and application form here.

I will be speaking about 'M&A Opportunities and Pitfalls in the Label Industry'. A growing label market with more than 15,000 companies world-wide offers opportunities for both strategic and financial  investments.

Although growth in the label market has slowed in the mature markets, we  predict above GDP growth in the coming years both in the mature and emerging markets. The label industry has a lot of factors going for it such as the spread of industrialization and retailing in the emerging economies where labels are needed. In North America each person consumes 25 m2 of labels per year. In many emerging markets the consumption is still at only 3-5 m2 of labels per person per year with a huge upside for growth! In the mature markets such as North America and Western Europe continued legislation and QR codes are demanding more and more information on products, which leads to bigger and bigger labels. Intensified fight for consumer attention on the shelves requires more attractive labels. RFID tracking and functional use of labels will increase their use. Digital printing opens up new markets for small runs of customized labels. All these factors will continue to give above GDP growth also in the years to come.  

About half of the worlds converters are now in the emerging markets. Consolidation is happening in the mature markets with much more to come forced by a combination of fierce competition and the fact that many first generation owners are getting closer and closer to have to sort out the unavoidable generation shift. Many new label companies are popping up in the emerging markets. The balance is shifting with many M&A opportunities in both emerging and mature markets.

Label Companies for Sale.com hopes to help facilitating this process.
0 Comments

A quick Valuation of a Label Company

23/2/2012

0 Comments

 
There are many methods of valuing a label company such as the market approach, income approach and asset approach. The market approach compares sales of similar companies in ratio form. The income approach is based on the value of future earnings while the asset approach typically estimates the value of assets minus liabilities. Sometimes all are used, other times one is preferred.

The market approach is one of the least complicated and most widely used methods overall and in the label industry. It is based upon pricing multiples derived from comparable business sales, typically a multiplier to the 'normalized' annual earnings before interest, taxes, depreciation and amortization, also called EBITDA. Some use EBITDA as a proxy for cashflow. Other like it because it's less dependent on arbitrary accounting principles and how you finance your company. 

The key is which multiplication factor to use. We have seen many deals being made at ratios between 3 - 6. The more unique the company, the higher the ratio.

The first step in selling your company is to have a good understanding of the value. 3-6 times 'normalized' earnings before interest, taxes and depreciation will give you a first indication. The price you get for your company then has to be split between you, the owner, and the debt holders. 
0 Comments
Forward>>
    Picture

    Author

    Jens Brusgaard
    Label Companies for Sale.com

    View my profile on LinkedIn

      Subscribe via email

    Submit

    Categories

    All
    Buying
    Company Pricing
    Market Trends
    Selling

The Marketplace for Buyers and Sellers of Label Companies