Buyout firm Sun Capital Partners’ European arm has added to its growing portfolio of packaging companies and plans to expand further in Europe.
The mid–market firm has acquired UK plastic packaging company Britton Group from HSBC’s direct principal investments division. The firm plans to use the packaging company to expand in Europe via a ’buy and build’ strategy, Philippe Neuschaefer, Vice President of Sun European Partners told Financial News.
“We see Britton as a new platform investment to build a pan–European flexible packaging business. Packaging is a fragmented and regional market and we expect there to be numerous acquisition opportunities in the future.”
Recent figures from data provider Mergermarket and private equity firm Silverfleet Capital show that buy and build activity –– whereby private equity firms grow portfolio companies via the acquisition of smaller firms in the same sector –– increased by a third among private equity firms in 2010 as the buyout sector looked to consolidation as a means of creating value in their older portfolio companies.
Sun Capital Partners and its affiliates have acquired more than half a dozen packaging companies across Europe and the US in the past year alone.
Neuschaefer said: “Packaging is a sector that Sun is experienced in and committed to and believes that certain trends and dynamics in this industry are conducive to continued growth and prosperity for well positioned companies”
He added: “Flexible packaging is a market with strong growth prospects as it meets most or all of packaging demand drivers such as brand enhancement, performance and logistical efficiency.”
The packaging industry has not had a completely smooth ride through the financial crisis and the rising price of polymer has taken a toll on some of Britton’s peers. In 2009, Montagu lost about £40m in the restructuring of UK packaging group Linpac.
Mahmoud Atalla, head of UK Private Equity at HSBC Principal Investments, which acquired the company at the height of the financial crisis in 2008, said: “[Britton] has been a clear winner in the industry. Packaging has been a tough sector for private equity.”
During HSBC’s investment period Britton’s earnings before interest, taxes, depreciation and amortisation almost doubled.
Atalla added: “Britton’s impressive growth through a difficult polymer environment is testament to the management team’s ability to continue to innovate and transition the product portfolio up the value chain into higher margin, value added products, with greater differentiation, strengthening the company’s market position”
Last year was a record year for Sun European Partners, in which it completed 14 deals in Europe worth a total of $800m, and 37 acquisitions globally. The firm continued the trend by acquiring UK–based pharmaceutical group NextPharma Technologies in January this year.