Canadian Packaging

BMO Capital Markets Packaging Sector Merger and Acquisition Review

By Canadian Packaging Staff   

General BMO Capital Markets Report

BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group has released its fifth annual report on packaging mergers & acquisition (M&A) activity, entitled Mergers and Acquisitions in the Packaging Industry: 2009 Annual Deal Review. 

The report provides a comprehensive review of M&A in the packaging industry in North America as well as on a global basis over the past several years. The report provides an overview of reported M&A activity in 2009, examining M&A activity by sector, geography, acquirer type, size, and valuations. The report also provides a brief synopsis of each transaction announced during the year. In addition, the report examines packaging M&A trends over the past several years.

"The last year was the most challenging year for M&A activity in the packaging industry in recent history, affecting deal volume, valuations, and interest among all types of acquirers," notes Doug Lawson, managing director and head of BMO Capital Markets packaging practice.

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"The challenging M&A market conditions that characterized 2008 worsened in 2009. The credit crisis and difficult economic environment resulted in a significant slowdown in packaging M&A activity among strategic and financial acquirers," Lawson adds. "However, the challenging conditions that plagued 2008 and 2009 have begun to improve and we believe that positive packaging industry fundamentals and the strong rationale for consolidation in the packaging sector will begin to spur a recovery in deal activity in 2010."

Highlights of recent packaging M&A activity reviewed in the report include:

  • 2009 Global M&A volume declined from the ten-year low of 2008 – There were 169 announced transactions in 2009, a decline of 33 per cent from the 251 announced transactions of 2008 and a 56 per cent decline from the record setting level of 386 at the peak of the M&A market in 2007;
  • M&A Activity Weakened Across All Regions of the World – Europe and North America continued to remain as the two largest regions for deal activity worldwide, with 41 per cent and 40 per cent of deals in 2009, respectively. However, year-over-year, transaction volume fell year-over-year across all regions worldwide. Despite being one of the most active regions worldwide for packaging M&A activity, North American packaging deal volume declined 19 per cent with 16 fewer transactions in 2009 (69 deals) than 2008 (85 transactions);
  • All Sectors Were Affected by Market Conditions in 2009 – Transaction activity by sector in 2009 was similar to previous years. Rigid packaging accounted for the greatest number of deals, at 34 per cent. Transaction activity was similar between the flexible sector (22 per cent of deal volume) and paperboard (19 per cent of deal volume). The remainder of activity was split between labels, machinery, and other packaging. While M&A activity slowed across all sectors, paperboard packaging had the most significant slow-down on nominally and as a percentage change. Rigid packaging was least affected with only 21 per cent fewer deals in 2009 than 2008;
  • Announced Packaging Deal Value Was Down Year-Over-Year – The aggregate value for packaging transactions with reported values in 2009 was $10.6-billion for the 48 transactions (28 per cent of all deals) with reported values as compared to $11.7-billion in 2008 for the 87 transactions and $32.6-billion in 2007 for the 137 transactions with reported values. The median reported transaction value in 2009 was $26.7-million versus $17.3-million, $35.1-million, and $21-million in 2008, 2007, 2006, respectively;
  • Strategic Acquirers Continued to Account for the Majority of Transaction Volume – Strategic acquirers continued to lead M&A volume in the packaging industry, with 119 transactions or 70 per cent of announced deals in 2009 (versus 165 deals in 2008 or 66 per cent of announced volume). Private companies made more acquisitions in 2009 (85) than public companies (34). Private equity firms and their portfolio companies accounted for the remaining 50 deals or 30 per cent of transactions. 
  • Restructuring-Related M&A Activity Remained Strong – Restructuring-related transactions provided opportunities for financial investors and strategic acquirers as heavy debt levels were aggravated by the challenging economic and financing environment.

To request a copy of the Mergers & Acquisitions in the Packaging Industry: Annual Deal Review or to receive The Converter, a monthly BMO newsletter which reports on the activities and trends shaping this industry, please visit www.bmocm.com/industry/us/industrials/packaging/default.aspx or send an e-mail to Doug Lawson or Laura Hubbard.

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