Canadian Packaging

BMO Report Reviews Mergers and Acquisition Activity in the Packaging Industry

February 4, 2009
by Canadian Packaging Staff

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.