Deals have continued apace in the UK packaging industry following the record volumes seen in 2021, according to BDO’s recent Packaging Sector Insights report. The report from the business advisory firm, reveals that 28 packaging transactions have completed so far this year, following a record 52 deals in 2021. Plastic packaging has been the most frequently acquired material over the last four years, representing almost a third (32%) of packaging deals, followed by paper and cardboard materials with 24% of transactions.

93% of deals in the sector so far this year have been by strategic trade acquirers, as businesses consolidate, enter new regional territories, or acquire new product verticals. Publicly traded companies continue to be the most active acquirers, principally of domestic targets, but also of international businesses.

Macfarlane Group made its first acquisition outside of the UK earlier this year, buying PackMann, the German provider of protective packaging products for an enterprise value of £5.8 million. This marks the seventh acquisition for Macfarlane over the past four years, with the previous six all being UK-based assets.

Zeus has also been a serial acquirer, recently buying Swanline Group and sister company BoxMart, suppliers of paper-based gift, retail and ecommerce packaging, which contributed to the company’s £70 million uplift in annual revenues.

A further notable dynamic has been the increase in carve-out transactions, with businesses streamlining operations to focus on chosen growth markets.  MacFarlane, Essentra and Mondi have all reassessed their business models which has led to the strategic disposal of divisions.

Mondi sold its personal care components business to Japan-based conglomerate Nitto Denko for an enterprise value of EUR 615 million in February, enabling the group to focus on growing its core packaging division.  In August, the business sold its Russian operations for EUR 1.5 billion, and swiftly followed this with the acquisition of Burgo Group, the Italian producer and distributor of graphic paper, for EUR 40 million.  There is market speculation that Mondi could make a move to solidify its market position by acquiring a UK rival.

Roger Buckley, M&A Partner and Head of Industrials at BDO LLP, commented: “In such challenging times – with disparate effects across end sectors – M&A activity has been a necessity to expand capabilities, capture synergies, combat supply chain pressures and drive value creation across a fragmented market.  We see deal volumes correlating closely to high attractiveness of the UK packaging sector and the huge opportunities therein.

“Plastic packaging remains a fragmented market, with plenty of consolidation opportunity for acquirers looking to gain economies of scale.  Although paper packaging and diverse materials are becoming increasingly preferred, there is still high demand for plastics due to its versatility, cost-effectiveness, structural properties and ease of print and design.”

The report takes a detailed tour of the areas of focus driving sustainability in the market, including novel advancements that are gaining traction.

Alan Chan, M&A Director at BDO, said: “Governments have imposed policy changes to fast-track the shift to sustainability, making it more onerous for those companies who cannot keep up.  M&A can likewise fast-track the expertise of businesses seeking competitive advantage and position them for a sustainable future.”

Looking ahead, the balancing of different goals will continue to push businesses to innovate and will lead to a more price-competitive and multi-faceted sector.

Chan added: “Based on the inherent attractiveness of the UK packaging sector, we expect the M&A market to remain robust, with strategy shifts contributing to continued corporate activity alongside investor appetite for innovative, sustainable new technologies.”

Whilst we would hope members do not have any major issues over the festive period, we thought it would be useful to share with you a recently published list of Government helplines which you may find useful.

Included are hyperlinks that will take you to pages that provide extra information such as the opening hours for the helpline and what support they can offer.

The list can be accessed here

HMRC have announced that exporters will now have until 30th November 2023 (rather than March 2023) to move across to the Customs Declaration Service (CDS).

Following consultation with the border industry, this will ensure businesses have enough time to prepare for the change.

After 30th November, businesses will need to use CDS to make export declarations for goods they send out of the UK, as they already do for import declarations.

If businesses have not already done so, they should carry out the following initial steps:

• Apply for an Economic Operator Registration and Identification (EORI) number
• Subscribe to CDS so you will be able to submit export declarations from your software to CDS.
• Read the latest CDS guidance CDS guidance on GOV.UK – including the updated CDS Toolkit and ‘Key differences between CHIEF and CDS’  guidance and the introductory UK exports guide – to familiarise yourself with CDS.

HMRC will provide further information about the timeline for CDS exports by the end of January 2023. Businesses can also provide their preferred email address on GOV.UK to receive updates and notifications about CDS.

On 13th December, the Cabinet Office Borders Group hosted an all stakeholder call to update stakeholders on the Border Target Operating Model (TOM) publication timetable.

The call was chaired by Director Tom Smith and Baroness Neville-Rolfe, Minister of State at the Cabinet Office, who is the new Minister responsible for Borders.

The Minister informed stakeholders that she hoped to be able to announce what the Government’s conclusions are early in 2023 which will be followed by a period of engagement with industry.

She also gave an update on the development relating to legislation known as the Transitional Staging Period (TSP). Whilst the TSP was previously extended to 31st December 2022, the Government will not be introducing further import controls on 1^st January 2023, and the TSP would now be extended further to 31st January 2024.

Government will now proceed with the relevant legislative process to ensure this takes effect, with England, Wales and Scotland all laying their very own, similar Statutory Instruments with the same date.

The actual dates for implementation of the Border Target Operating Model will be explained in the draft document that is now due to be published in early 2023.The final TOM will be published later, but still in early 2023.

Defra have also indicated that they will build on the summer workshops they ran previously, and further engage with key audiences in the UK and the rest of the world (RoW) to collect feedback when the draft TOM is published.

Regarding the TOM, the Minister outlined the following:

1. That decisions will be based on evidence and to strike the right balance between making sure the border does its job – for example in ensuring biosecurity and keeping trade flowing.
2. To ensure we provide industry with clarity, setting out a long-term plan that allows them to plan business and operational changes.
3. To give businesses the necessary time to prepare for the new model and the need to set out a clear timetable leading to any change.
4. A strong commitment to the 2025 Border Strategy, working towards a modern border that exploits technology and data, which adopts a fully joined up approach. This would all be underpinned by the Single Trade Window, which is currently in development.