BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group, has released its third annual report on packaging M&A (mergers and acquisitions) activity, entitled Mergers and Acquisitions in the Packaging Industry: 2008 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 last several years. The report provides an overview of reported M&A activity in 2008, examines M&A activity by sector, geography, acquirer type, size, and valuations, and 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.
Highlights of recent M&A activity in the packaging sector which are reviewed in the report include:
• Global M&A volume declined after five consecutive years of increasing activity: In 2008, there were 252 announced transactions worldwide, which represent a decrease of 35% from the 386 announced deals in 2007 and the lowest level in the past ten years.
• 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 38% and 34% of deals in 2008, respectively. However, year-over-year, transaction volume fell off across all regions worldwide in 2008. While North America was the second most active region worldwide with 34% of total global deals, North America experienced the largest drop, with 56 fewer transactions in 2008 (86 transactions) than 2007 (142 transactions).
• All Sectors Were Affected by Market Conditions in 2008: In 2008, the number of deals in the packaging industry was relatively evenly dispersed between the rigid (29%), paperboard (24%), and flexible (23%) sectors. The remainder of activity was split between labels, machinery, and other packaging. While M&A activity slowed across all sectors, flexible packaging had the most significant slowdown on a nominal basis. Packaging machinery was least affected with only 18% less transactions in 2008 than 2007.
• Announced Packaging Deal Value Was Down Year-Over-Year: The aggregate value for packaging transactions with reported values in 2008 was $14.9 billion for the 88 transactions (35% of all deals) with reported values as compared to $32.6 billion in 2007 for the 137 transactions (35% of all deals) with reported values. The median reported transaction value in 2008 was $17.3 million versus $35.1 million in 2007 and $21.0 million in 2006. • Strategic Acquirers Continued to Account for the Majority of Transaction Volume: Strategic acquirers continued to lead M&A volume in the packaging industry, with 166 transactions or 66% of announced deals in 2008 (versus 255 deals in 2007 or 66% of announced volume). Private companies made more acquisitions in 2008 (94) than public companies (72); while in 2007, public companies had been more active than private companies. Private equity firms and their portfolio companies accounted for the remaining 86 deals or 34% of transactions.