While mergers & acquisitions in the packaging industry have fallen 53% in the last 12 months, the number of transactions has started a rebound from the lows of 2009. From the BMO Capital Markets’ just-released The Converter come the following bullet points to keep you up to speed on the topic:
- Since 2006, both public and private strategic acquirers made up two-thirds of global packaging M&A activity with 847 transactions. Private-equity acquirers announced 407 buys in the past four-and-a-half years, or one-third of packaging M&As.
- Private strategic acquirers made up the highest percentage of packaging acquisitions (36%) or 462 transactions since 2006.
- YTD 2010 overall strategic M&A volume is up 7% from YTD 2009—from 61 deals to 65 deals; but public strategic M&A activity has jumped 113% YTD 2010 from last year—16 deals to 34 deals.
- YTD 2010 overall private-equity activity has rebounded, increasing 29% over YTD 2009—from 24 deals to 31 deals.
- The median value of the 10 largest strategic deals is smaller than the median of the 10 largest private-equity deals. International Paper’s 2008 purchase of Weyerhaeuser’s containerboard operations ($6.0 billion) was largest packaging deal since 2006.
- Each of the 10 largest strategic packaging deals are in excess of $600 million; and the median total value of the top 10 deals is $1.1 billion.
- The largest private-equity/financial packaging acquisition since 2006 was SIG Holding’s $3.0 billion purchase of the Consumer Product and Closure Systems Business of Reynolds Packaging Group.
- The total value of each of the 10 largest private-equity packaging deals is in excess of $1.0 billion, with a median of $2.0 billion.
My Thoughts: Despite the sluggish economic recovery (weighed down by high unemployment and overall business uncertainty), look for packaging and other M&As to return to levels close to “the Olden Days.” Why? I think that as companies continue to hold off on investing in new capital equipment and new hires, they still believe that perhaps the only way to grow now is to buy out their failing competitors or other well-performing related businesses. As President Obama and a Democratic Congress do their best to dismantle the Free Market System, being bigger is increasingly seen as a good survival strategy.