North America Leads M&A Deals in Forest, Paper, and Packaging Sector
July 9, 2008 - Merger and acquisition activity in the forest, paper and packaging (FPP) sector increased to $27.6 billion, globally, in 2007, up $1.9 billion from 2006. Deals in North America accounted for $17 billion, which represents 62 percent of the total global deal value, according to a new report from PricewaterhouseCoopers, "Branching out: Global deal activity in the forest, paper & packaging industry, 2008 Edition." While total deal value in 2007 in North America remained flat compared to 2006, the percentage of total global deal value declined from 67 percent in 2006 to 62 percent in 2007.
Much of the major activity in North America in 2007 was driven by
consolidation, with significant activity happening in both the
graphics papers and packaging sectors.
Much of the major activity in North America in 2007 was driven by consolidation, with significant activity happening in both the graphics papers and packaging sectors. The year's biggest deal created the world's largest newsprint producer, controlling nearly half of the capacity in North America. The attractiveness of forestland assets continued to drive deals, with the institutional acquisition of U.S. corporate-owned forestlands driving two of the five largest deals in 2007. Of the top ten global deals in 2007, six involved companies in the United States, with a U.S. company serving as the acquiring entity in five of those deals.
As in recent years, private equity continued to play a key role in deal activity in 2007. Globally, $10.4 billion in deals included some private equity participation, representing 38 percent of the total deal value. Global private equity deal values were dominated by North America, with 92 percent, or $9.6 billion of the total, stemming from this region. Six of the top 10 North American deals in 2007 involved private equity participation.
In contrast to many other industry sectors, where the tough credit markets and cloudy economic fundamentals have combined to dampen transaction activity, early 2008 saw an upsurge in deal activity. In the three months to March 2008, reported deal values totaled almost $12 billion globally with deal volume at 77 deals, both trends exceeding the past two years, when the fundamentals for deal-making were strong. North America continued its domination in the sector, accounting for $9.6 billion of the global total.
"There was no shortage of major deals in North America in 2007," said Todd Stroup, U.S. leader of the forest, paper and packaging sector for PricewaterhouseCoopers. "North American companies used transactions in 2007 to both strategically restructure their business and to address overall capacity issues. And, this trend should continue into 2008. With the strong start we've seen in the first quarter of this year, deal activity in North America is on pace to exceed the 2007 totals."