Merger and acquisition activity in the packaging sector may be at a turning point. Although 2024 saw lighter deal flow compared to previous years, analysts generally expect the pace of transactions to pick up in 2025.

"After a tough 2024, there are good reasons to believe that 2025 will be a better year than a tough one. Some are even more optimistic," said Will Frame, CEO of Deloitte Corporate Finance.

The COVID-19 pandemic that broke out about five years ago began a period of economic turbulence. Frame explained that unstable economic conditions are "a truly harmful combination, not conducive to the optimism and growth that typically underpin M&A activity." The recent sluggish packaging demand environment is consistent with low M&A activity. But he noted that the destocking phase "has certainly passed. It lasted well into 2024, far longer than anyone expected."

As supply chain volatility and packaging economic indicators stabilize, 2025 could be a year when M&A volume returns to some degree of normalcy. The administration of President Donald Trump is also expected to have an impact. Private equity may emerge from its recent trough, potentially leading to more of the large deals seen recently.

"Will we see more of these large acquisitions? That's hard to say. But I think after large acquisitions, we may see portfolio streamlining... I think there could be some form of plant rationalization, plant closures, or business line rationalization," said Michael Roxland, senior paper and packaging analyst at Truist Securities (who only comments on publicly traded companies).

Seeking Opportunities in Niche Segments

Packaging niches poised for growth are often also areas with greater consolidation potential. The biggest consolidation opportunities in 2025 may lie in niche segments rather than broad categories.

Frame said that broad areas such as glass and metal are already fairly consolidated. But in areas like flexible packaging (including plastics and labels), after the consolidation wave of 2022-2023 and the slowdown in 2024, a considerable level of activity should emerge.

According to data from The Freedonia Group, molded fiber has experienced a steep growth curve over the past decade and is expected to expand further by 2030. This could bring more M&A opportunities to the sector in 2025 and the medium term.

"There is a lot of growth and innovation in the molded fiber packaging space, and there is still room for consolidation in this area," said Jennifer Christ, research manager for consumer and commercial goods at The Freedonia Group.

Analysts note that the momentum of brands adopting more sustainable packaging (such as moving away from plastics) is also influencing M&A in certain markets. Fiber-based packaging substrates, especially molded fiber, are "riding the tailwind. We expect this trend to continue," Frame said.

Reusable packaging—whether plastic, metal, or glass—is another area expected to grow due to its sustainability attributes, Frame said. The Freedonia Group is also watching the smart packaging (i.e., "active and intelligent" packaging) space, which, given its links to sustainability, could generate more M&A activity.

"Given the growing interest in innovative solutions to sustainability and functionality challenges, packaging companies may be inclined to acquire technology rather than face the long cycles of internal R&D," Christ said.

Will Large Deals Continue?

Many of 2024's deals were notably large. Analysts expect large-scale M&A to continue, or even intensify, in 2025.

Smurfit Kappa kicked off the wave of multi-billion-dollar deals in late 2023 by announcing the acquisition of WestRock, which was completed in July 2024, creating the world's largest packaging company. Several other large deals were announced in 2024, some of which have been completed, such as Sonoco's $3.8 billion acquisition of metal packaging company Eviosys. Others, like Novolex's $6.7 billion acquisition of Pactiv Evergreen, are still in progress.

Many large deals cross borders, including Tennessee-based International Paper's acquisition of London-based DS Smith (expected to close on January 31), and Switzerland-based Amcor's $8.4 billion acquisition of Indiana-based Berry Global (ongoing).

Analysts are still trying to gauge whether the wave of large deals will affect how U.S. and foreign regulators review market concentration and deal approvals. Neither the Smurfit WestRock deal nor Sonoco's acquisition of Eviosys required divestitures. But at least one subsequent deal has met a different fate: The European Commission announced in January that International Paper must divest five plants to gain approval for its DS Smith acquisition, contrary to most observers' earlier expectations that the deal would face minimal regulatory hurdles.

Some large deals do not involve entire companies but rather the divestiture of specific business units or exits from joint ventures. Ball completed the sale of its aerospace business for $5.6 billion in 2024, becoming a pure-play packaging company. Similarly, Clearwater Paper completed the sale of its tissue business to Sofidel for $1.06 billion, focusing on paperboard. In December, Veritiv completed its acquisition of Orora Packaging Solutions (the U.S. business of Australia's Orora), and Amcor sold its 50% stake in the joint venture Bericap North America. Toppan Holdings plans to acquire Sonoco's thermoformed and flexible packaging business for $1.8 billion, with the deal expected to close in the first half of this year.

Analysts believe such partial deals will continue at least through this year. International Paper announced in the fall the possible sale of its global cellulose fiber business, making it one of the most watched targets.

Another company to watch—whether for acquiring business units or entire companies—is Brazilian pulp producer Suzano, which entered the U.S. packaging market last year by acquiring two Pactiv Evergreen plants. The company also attempted a failed acquisition of International Paper last year that drew little attention from most analysts. Late 2024 saw rumors that it might make a move on Clearwater Paper in 2025, although Suzano issued a statement in December saying no formal agreement had been reached.

Private equity continues to play a significant role in large packaging M&A deals, such as Glatfelter's merger last year with the global nonwovens and films business for health, hygiene, and specialty products divested by Berry Global, forming the new company Magnera. Apollo is the majority shareholder of Novolex, which is acquiring Pactiv Evergreen.

But the pace at which private equity firms are selling assets acquired between 2015 and 2023 (which Frame calls a "large cohort") has been relatively slow over the past two years. This aligns with the broader industry trend of private equity holding substantial capital not yet deployed. But that could change soon.

"This situation cannot last forever," Frame said. As conditions improve, "you will see a significant portion of that cohort start to come to market."

Roxland said that despite ups and downs, the packaging industry typically performs steadily, "which is why private equity has been involved in this space for a long time. Private equity is there, they are evaluating, and trying to find the right opportunities."

Is the Federal Government Friend or Foe?

President Trump's policies will have an impact on M&A activity. But just days into his term, analysts are reluctant to make definitive predictions about how or to what extent his policies will change deals and the overall deal environment.

Frame noted that, in general, changes in government often come with optimism. Meanwhile, economic data—including employment statistics—have been "stubbornly strong," despite headwinds such as sticky inflation and high interest rates. These strong data points are also often positive signals for M&A activity.

The public generally perceives Trump as pro-business. Roxland noted that pro-business leadership often drives investment. "We'll just have to see how he handles key industries... and what that ultimately means for regulation," he said.

Gabe Hajde, senior analyst for packaging and paper equity research at Wells Fargo Corporate and Investment Banking, did not directly predict in a November discussion whether the Trump administration would affect the pace of M&A, but noted that the public has historically believed that "Republican administrations are generally more permissive toward M&A in their regulatory approach."

"The new administration has made no secret of taking a less aggressive stance on regulation and possibly antitrust enforcement. I expect large acquisitions will face less scrutiny, which could incentivize deals that previously would have been more burdensome to complete," Christ said.

The potential impact of Trump's promised tariffs (at least some of which are set to begin in February) is also a variable.

"Given tariff threats and the need to secure supplies of pulp and recycled materials, companies may seek to strengthen their supply chains. Whether through acquisitions, joint ventures, or other strategic agreements, businesses will be looking at forestry and paper processing options as well as waste management deals," Christ said.

Another factor is the Federal Reserve's interest rate decisions throughout 2025. Roxland explained that lower rates could accelerate M&A activity.

Analysts say to be prepared for surprises, whether in the factors that could affect M&A in 2025 or in the companies announcing deals. Regardless of where deals occur, "my gut tells me this will be a fairly active year," Roxland said.