This is the fourth in a series of articles that look at why the packaging distribution industry is ripe for M&A exploration. This article examines key considerations surrounding serial acquisitions and the critical steps that business owners need to take to unlock value through effective integration. 

The U.S. packaging distribution market is highly fragmented and well positioned for potential buyers to build roll-up acquisition strategies. While serial acquirers will often develop a bespoke set of deal “archetypes” to guide their approach to acquisitions and integration at pace, roll-up strategies in packaging distribution will largely fall into two camps: (1) core expansion — targets with similar offerings and business models that have as their primary goal to build scale, access a new geography or market, and/or acquire customers; and (2) capability extension — targets with new capabilities with respect to the three critical growth imperatives in packaging distribution: value chain extension, equipment offering development and/or product mix expansion. 

Maximizing value will have different requirements depending on the role of M&A within your broader strategic vision. 

Key success factors for a core expansion roll-up strategy

A core expansion roll-up strategy is straightforward: Build scale and buy access to new markets or customers. It’s bigger, not better, and while selecting the right assets is always key, winners essentially do one thing better than everyone else: They move faster. Of course, achieving that agility is not quite as simple as it sounds, but it captures the essence of what it takes to maximize value employing a core expansion strategy. Ultimately, in a highly fragmented space, like the current packaging distribution market, the speed at which you can identify and integrate (absorb) assets is the primary limiter on your inorganic growth. So how can you unlock that next gear in your M&A engine? 

The best serial acquirers will have some form of each of the following: 

  • A highly focused integration playbook that distills the most essential elements of integration 

  • An “adopt and go” philosophy, where AcquireCo ways of working and systems are the presumed end state 

  • A dedicated individual or team focused on driving integration — a sufficient breadth of M&A know-how across leaders in the business can offset this, but only if leaders have sufficient time to meaningfully dig in 

  • A clear view of what “done” looks like for acquired assets 

  • A manner of monitoring progress and ensuring clear (a single point of) accountability for completion 

One of the most critical success factors for driving integration at pace is to quickly develop an integration playbook and to jump-start, or level up, native M&A capability with an approach like L.E.K. Consulting’s Rapid Integration Deployment (RID); developing a robust playbook is key to building the M&A “muscle” to execute on further acquisitions and integrations, with or without third-party support. 

Key success factors for a capability extension roll-up strategy 

A capability extension roll-up strategy comes with a different challenge: How can you cut through the noise and quickly identify the “secret sauce” that enables the new capability central to the deal thesis? Similar to a core expansion roll-up strategy, a disciplined approach and integration playbook are still a good foundation; however, to maximize the value of a new capability, there will be fundamental differences in the target that must be identified and preserved. Effective identification of which differences are critical, and which are not, is essential to avoid underperformance relative to expected synergies, or even worse, strangling the target business altogether. 

The best capability builders via M&A are able to effectively navigate the inherent complexities of integration and are surgical in their prioritization. They will: 

  • Clearly communicate with the target the desired capability, its role and expected synergy within the broader NewCo 

  • Cut through the “noise” of broader integration and rapidly distill key enablers (elements of culture, structures, systems or ways of working) that are essential to the target’s complementary capability(ies) 

  • Constructively challenge the target’s ways of working, and offer support where NewCo competencies may help drive effectiveness and/or efficiency  

  • Integrate selectively (or not at all), ensuring key enablers are ring-fenced or elevated 

  • Apply ruthless focus to ensure the target core business is preserved, growth synergies are unlocked, must-have or non-negotiable integration elements are executed (e.g., financial reporting, compliance), and only afterward is broader integration pursued 

Navigating more complex or ‘hybrid’ roll-up strategies

In spite of the increased complexity, key success factors for core expansion or capability extension roll-up strategies still hold true. The challenge for acquirers is to strike an effective balance between driving to “best of both” in key areas and still deploying a more focused and selective approach elsewhere. This is not an easy task, and it is why so many businesses fail to achieve the desired result. In these instances, a unique blend of integration know-how and expertise in the packaging ecosystem is critical to ensure each integration decision can be tied back to how you win in the market. Sourcing the right talent externally or finding the right partner to help deliver, as well as coaching your team, can help ensure you realize the full potential value of the deal.

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Creating Value in the Fragmented Packaging Distribution Landscape
conveyor belt with packages
In part one of a series on packaging distribution, we explore the structure and fragmentation that help to make it an attractive investment opportunity.

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