Industry restructuring – M&A

In our recently published review of deals in 2010 (FPP deals: Branching out 2010) we saw deal momentum starting to return to the FPP sector, and we expect to see an upturn in deal value in 2011. That's because of a number of important themes which are underpinning deal momentum:

  • consolidation, particularly long-awaited consolidation in Europe,
  • security of fibre supply,
  • geographical diversification into new growth markets,
  • repositioning of product
  • operational portfolios and a continuing flow of institutional money into timberlands.

After years of waiting, the time has come for consolidation in Europe. Talk has turned to action with previously reluctant sellers starting to make their moves. In North America consolidation is continuing against a background of stagnant or declining domestic markets. In other regions where the industry is on the growth path, consolidation will also be an important theme, moving at different paces as markets evolve and it will be more attuned to growth rather than contraction.

We also expect to see more deal flow from companies looking to access new geographic markets. This is taking place in different sectors in different ways. In Japan, the paper makers face a steady decline in domestic demand and they are likely to continue their hunt for targets in faster growth Asian countries to internationalise their reach. Global paper companies will also continue to look for opportunities to extend their presence. Downstream, companies are seeking to build global businesses and brands in high value added segments such as personal hygiene and tissue, with investment focusing on high growth market opportunities.

The Asian fibre deficit, most notably in China, will be a continued force behind outbound acquisitions of foreign fibre resources by Chinese and other Asian companies. Private equity has returned to the sector and is playing a very large part in the downstream sector, in packaging and converting. Finally, we see a continued flow of institutional money going into timberlands, a flow which is becoming more global, attracting institutions from Europe, Asia and South America as well as the traditional North American funds.

How PwC can help

You need to ensure your deal decisions are well informed and your investments are successful. At PwC our Transaction Services and Corporate Finance teams unparalleled strength – in people, knowledge and services – who can help you achieve your goals. Our financial, operational, strategic, structuring and corporate finance specialists work alongside our other specialists within the firm including Tax M&A, HR, valuation, IT and sustainability to enable you to extract maximum value from your business before, during or after a transaction.

In addition as one of the world’s largest, globally networked providers of business recovery services, we can help you by offering a broad palette of restructuring services to stakeholders in troubled and seriously underperforming businesses.