More mergers on the cards

At least 46 UK packaging firms are prime targets for a takeover and another 148 could be sold off by their parent companies, according to a new report

At the other end of the scale are 21 major companies that are expanding rapidly, largely through acquisitions, and 68 "predators" who are using the misfortune of others to clean up in the market.

Plimsoll's senior analyst, David Pattison, said: "The 46 takeover targets we have identified generally have a similar profile - they are privately owned, are in financial difficulty and have owners who are approaching retirement".

"Any firm in this position should be listening to the warning bells, because its potential selling price will be in the bargain basement".

"The other 148 distressed companies are operating as divisions of larger parents".

"I'm fairly certain that conversations are going on behind closed doors about their future.

The big players in the market are focusing on companies with sales of around GBP5m.

Interestingly, some are being bought not just because they offer good value for money and an extra foothold in the market, but in case they fall into the hands of competitors.

The 180 companies that fall into this bracket are in the fortunate position of being in a sellers' market, so they are able to name increasingly higher prices as availability reduces.

Said David Pattison: "These are typically the two classic profiles of the takeover target - up-and-coming industry players and those who have fallen on hard times".

"Sadly, in the latter category we see some firms that were doing very well only a few years ago but allowed costs, debts and margins to get out of hand".

"It's worth saying that our research has identified 275 companies whose current value is 50% lower than a credible future value".

"Potential new owners believe that they can run the company better than the current owners and turn this future value into hard cash".

"Against a background of over capacity, rising costs and falling margins, consolidation in the UK packaging market is inevitable in 2007.

Plimsoll's brand new VIBE analysis of the packaging industry paints a clear picture of each company in the market.

It identifies those in financial distress, those with aging boards, those with hidden potential and a range of other factors that affect their likelihood of being taken over.

VIBE is available to purchase.

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