What a difference 17 years can make. It’s been that long since CCL Industries did its first acquisition (the Engraph Div. of Sonoco in 1993). But as Geoffrey T. Martin, president of CCL Label, recounts, that purchase was the catalyst that has brought the company to its market-leading position today. Martin spoke yesterday at the Mergers & Acquisitions Executive Forum in Chicago, organized by AWA Conferences.
With CAN$1 billion in sales last year, CCL Label is the world’s largest converter of pressure-sensitive and film (sleeves, IML) materials. It targets top global customers in the consumer-packaging, healthcare and consumer-durables segments. The company’s big growth markets: HBA, pharmaceuticals, household-care and wine. Now, with 53 plants around the world, almost all acquired, CCL Label is just about everywhere—except Antarctica. “We bought lots of dots on the map, not just in any one continent or region,” Martin says.
A rundown on some of its international purchases:
- Prodesmaq (Sao Paulo, Brazil). A very successful acquisition, Martin explains. CCL paid about 4X EBITDA in hard currency (about $45 million) but has been able to take out an equal amount so far in profits.
- CCL Kontur Russia (near Moscow). The 50-50 JV with a local investor had been very profitable until 2008. CCL released control back to the partner, and sales have since bounced back.
- Pacman-CCL was formed to run operations in the United Arab Emirates, Egypt and Oman. “It’s an attractive part of the world for consumer products and the packaging,” Martin says, particularly for p-s labels and shrinkable films.
- A new healthcare-labeling plant will open in Tianjin, China, by late 2010. The Chinese healthcare/pharma market is booming, unfortunately due in part to tens of millions of new diabetic patients in China.
- CCL Label’s latest deal: Purbrick (Melbourne, Australia). The family-owned converter, which serves the nearby GlaxoSmithKline plant, was bought to build market presence Down Under.
So, how does CCL Label do acquisitions? “We like smaller deals,” Martin explains. “A large deal for us is $100 million, and we try to pay around 3X-5X EBITDA. We like companies that are already known to us, the stepchildren of larger enterprises; and known technologies and markets.
“We focus on serving large, global customers, focus on world-class facilities and technologies. We acquire to expand our corporate footprint and our product capabilities, especially in emerging markets. An acquired business gets focused on growth at current margins.”
How does CCL Label maintain a global reputation? “Platform technologies, such as large gravure presses, assure consistent quality and color management for all labels for all products and brands no matter where they’re printed,” Martin says. While a 50,000-sq-ft gravure plant in New Jersey can mean an $8-million investment, he explains, the same plant in China might run only $4 million. That’s not to say CCL Label is moving everything offshore, it’s the idea of keeping things consistent globally, he says.
My Thoughts: Although I felt seriously underdressed without a tie among all the banking bigwigs and private-equity investment types at yesterday’s conference, I did gain a lot of value and insight into M&As for the paper, packaging and converting fields. There are lots of ways to grow your business, and an acquisition (large or small) is certainly an option worth investigating, especially now that money is once again available.