Forest, paper and packaging deals: Branching out 2010 annual review

According this year’s Forest, paper and packaging deals annual review, distress continues to affect many non-integrated pulp and paper companies in mature markets who remain caught between high input prices and low demand. In contrast, integrated producers continue to successfully emerge from the downturn and with relatively healthy balance sheets. Economic growth in Asia and South America continues to reward companies with good fibre footprints, particularly in Latin America. Downstream, private equity is playing a major role with a mix of outcomes, but success is coming to companies who have focused on specialist product areas and growth markets.

Key findings for the FPP industry from the 2010 annual review

• There were more forest, paper and packaging (FPP) deals in 2010 than in any other year since 2003 however, average deal value plummeted to the lowest seen in the same period.
• Distress deals were common in response to the economic crisis
• The long-awaited round of consolidation in Europe may have begun with a major deal towards the end of the year
• Private equity returned to the sector, the main factor behind US•.8bn worth of FPP deals in 2010

 What’s ahead in 2011 and beyond for the FPP sector?

Deal momentum continues to return to the FPP sector and we expect to see an upturn in deal value in 2011. A number of important themes have spurred this momentum:

• Consolidation, particularly long-awaited consolidation in Europe
• Security of fibre supply geographical diversification into new, growth markets
• Repositioning of product and operational portfolios
• Continuing flow of institutional money into timberlands

It was a busy year for deals in the FPP industry but, as our Global Forest, Paper & Packaging team predicted in last year’s report, they were largely confined to small transactions. The report is the latest edition in our Global Forest, Paper & Packaging group's annual series on deal-making in the sector.