Case Studies | Exopack
Exopack
Spartanburg, South Carolina
Leading provider of flexible packaging products.
| Investment date: | August 2001 |
| Transaction value: | $127 million |
| Sterling team: | William Oehmig, John Hawkins |
Background
Sterling acquired Exopack from International Paper in 2001. Exopack was
considered a market leader in its businesses yet operating margins had
fallen below industry standards. Sterling believed there were two
significant value creation opportunities available. First,
operating the business as a stand-alone packaging company, rather than
as a division of a large paper company, would provide opportunities to
improve operating margins through cost reductions at the manufacturing
plants and enhanced sales and marketing efforts. Second,
there was an opportunity to implement an acquisition strategy which
would (i) provide cost synergies in the form of economies of scale in
the purchase of raw materials and overhead cost savings and (ii)
increase the percentage of revenues derived from plastic packaging,
which would increase the company's organic growth rate and make the
business more attractive to potential buyers when we were ready to exit.
Sterling Impact
Sterling assisted the management in separating the business from
International Paper including recruiting senior management personnel for
the positions that were not occupied under the previous ownership such
as CFO and General Counsel. For the first time, management and employees
became substantial shareholders in the company. Management then refocused
the company as a stand
alone packaging business rather than being part of an integrated paper
producer. In order to become more cost competitive the company underwent
several major initiatives to take costs out of the business including a
realignment of plant assets, working capital reduction efforts and
general reductions in staffing.
During Sterling's ownership two acquisitions were completed which changed the revenue mix from 80% paper and 20% plastic to 65% paper and 35% plastic. The first acquisition was Specialty Films which expanded penetration in stand-up pouches, one of the fastest growing segments of the packaging industry. The second acquisition included the assets of Plassein International thereby expanding the performance plastics division at an attractive purchase price.
The synergies from these acquisitions along with the cost reduction measures increased the Company's EBITDA margin from 6.9% in the first year of ownership to approximately 8.0% for the twelve month period ended March 31, 2005. Additionally significant debt repayments were made from reductions in working capital during Sterling's ownership.
Outcome
Exopack was sold to a fund controlled by Sun Capital Partners in October 2005.
| Revenue CAGR | 9.8% |
| EBITDA CAGR | 14.7% |
| EBITDA margin improvement | 6.9% to 8.0% |
| Sterling return on investment | 4.0x |