Plastic Molding Manufacturing continuing with M&A pipeline despite COVID-19, owner says

19 March 2020 - 11:27 pm UTC

by Onofrio Castiglia in Charlottesville, Virginia

Plastic Molding Manufacturing, a Hudson, Massachusetts-based manufacturer of molded plastic components, is carrying on with three deals it plans to complete in 2020, majority owner George E. Danis said.

 

As COVID-19, or the novel coronavirus, continues to spread and stall economic activity throughout the US, Danis said he has been “inundated” with calls from his customers looking for assurance that they will still be able to get the plastic components they need to make their products, he said.

 

Danis said he thinks the virus could ultimately be a positive for domestic manufacturing, as companies with complex supply chains reaching into Asia are among the hardest hit right now.

 

PPM plans to move forward with deals of three plastic injection molding companies in New England, North Carolina and upstate New York, with targets at annual revenue of USD 25m, USD 18-20m and USD 7m, respectively.

 

“So far, we feel good about it,” Danis said of completing each deal. But he said “things could change” depending on how long the virus lasts and how much damage it does to the US economy.

 

The deals could “absolutely” be delayed or even cancelled if customers start to cancel orders because of a prolonged downturn in consumer spending, he said. “Again, nobody knows.”

 

Deals in the space tend be 4x-5x EBITDA, Danis said. That hasn’t changed yet, but it could if liquidity dries up.

 

PPM has more than 200 employees with facilities in Hudson; Berlin, Connecticut; South Bend, Indiana; Lancaster, Pennsylvania; and Putnam, Connecticut. Danis, who has one retired minority partner with 1.5% equity, said the company has more than USD 30m in annual revenue.

 

The company most recently acquired Phillips-Moldex with 35 employees in Putnam in November 2019; MBS Advisors represented PM on the acquisition. Before that PPM bought Aucilla in South Bend in January 2016.

 

PPM’s customers include General Electric, 3MBoston ScientificSmith & Wesson and many small companies, Danis said. Right now, things like medical devices and gun handles are in high demand.

 

Danis said he has no intention of selling his company in the near term. He said he expects there will be increasing consolidation in the space as the economy worsens and smaller players go into distress. Negative interest enacted by the Federal Reserve would further help drive consolidation by lowering the cost of financing deals, he said.

 

When making acquisitions in plastic molding, Danis said he looks for profitable targets with a skilled workforce, management expertise and a reliable customer base. Facilities are less important, as they can be upgraded.

 

PPM uses MBS Advisors to canvass the market, Danis said. He said he does not use an investment banker to negotiate deals but is open to calls. “Maybe we should be using it more,” he added.