Twenty nineteen Global Forest, Paper, and Packaging M&A activity finished the year below historical levels. Deal value and volume declined 69% and 15%, respectively, compared to 2018. The lack of megadeals in 2019 contributed to lower deal value.
Flexible Packaging and Miscellaneous Products led sector categories in both deal value and volume, representing 60% and 52%, respectively for 2019. Seven of the top ten deals in 2019 occurred in this category. Nippon Paper Industries announced acquisition of Orora Ltd. ($1.2 billion) was the largest deal of Q4 2019 and second largest of 2019 for the sector.
"Flexible packaging led all sector category M&A activity in 2019. M&A activity in 2020 will likely experience many of the same themes that impacted 2019.”
M&A activity in 2020 will likely experience many of the same themes that impacted 2019. On a positive note, high levels of available cash on both corporate balance sheets and private equity funds, the low cost of debt, and continued focus on portfolio rationalization presents optimism for M&A moving into 2020. Record stock market levels and high company stock valuations could allow for leveraging stock as a financing tool even with high seller multiple expectations. Strategic buyers in Asia Pacific could continue to be active in the sector.
However, growing geopolitical tensions, especially in the Middle East, Brexit uncertainty, on-going trade negotiations between the US and China and the looming fears of a recession are all factors that will drive investors to exercise caution when evaluating and pursuing their M&A strategies.
Supply chain optimization will continue as a key value driver for deal makers as they look to mitigate any impacts of US and China trade negotiations and the implementation of the new USMCA Trade Agreement. Flexible packaging should remain an attractive sector category as consumer demand for environmentally friendly and sustainable solutions increases. The e-commerce economy, demand for quality consumer packaging, and corrugated shipping cartons should continue to increase and present opportunity.
Technology and innovation will continue as popular themes. Such solutions will continue to be highly sought after and cross-sector companies who can bring these capabilities are expected to be attractive M&A targets or industry acquirers. Prior period consolidation activity, particularly in North America may result in more divestiture activity as company’s look to rationalize non-core assets.
The information presented in this report is an analysis of deals in the global forest, paper, and packaging industry. Deal information was sourced from Thomson Reuters and includes deals for which targets have an SIC code that falls into the paper and packaging mid-industry group. Certain adjustments have been made to the information to exclude transactions which are not specific to forest, paper, and packaging or incorporate relevant transactions that were omitted from the SIC industry codes.
This analysis includes all individual mergers, acquisitions, and divestitures for disclosed or undisclosed values, leveraged buyouts, privatizations, minority stake purchases, and acquisitions of remaining interest announced between January 1, 2017 and December 31, 2019, with a deal status of completed, partially completed, pending, pending regulatory and pending completion, and excludes all rumors and seeking buyers. Additionally, transactions that are spin-offs through distribution to existing shareholders are included.
Percentages and values are rounded to the nearest whole number which may result in minor differences when summing totals.