Global forest, paper and packaging deals insights: Q3 2019

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Executive summary

2019 Global Forest, Paper, and Packaging M&A activity continues to lag behind historical levels. Deal value and volume declined 74% and 19%, respectively, compared to YTD 2018. The lack of megadeals continues in 2019 contributing to lower deal value compared to 2018.

Flexible Packaging & Misc. Products and Forestry were the most active categories with 48% and 36% of deal value this quarter, respectively. Forestry saw largest deal for the quarter at $744 million. Financial investors have increased their share of deal value from 11% to 44% when comparing YTD 2019 vs. YTD 2018.

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“Macroeconomic and geopolitical uncertainty continue to give investors pause as they evaluate M&A growth strategies in the sector.”

Max Blocker - Global Forest, Paper and Packaging Deals Leader

Trends and highlights

  • Total deal value in Q3 2019 declined by 50% to $3 billion when compared to Q2 2019. For YTD 2019, deal value declined by 74% to $11.3 billion over YTD 2018.
  • In Q3 2019, the deal volume slightly declined by 6% to 129 deals vis-à-vis Q2 2019. In YTD 2019, the deal volume also declined by 19% to 362 deals over YTD 2018.
  • The average deal size in Q3 2019 saw a one-third decline to $61 million over Q2 2019. Average deal size for YTD 2019 also declined by 71% to $70.3 million over YTD 2018. The lack of megadeals or even large deals (>$1 billion) is hampering the average deal size.
fpp-deals-trends-highlights

Highlights of deal activity

fpp-deals-activity-overview
fpp-deals-activity-chart

Key announced transactions (YTD 2019)

Announced

Target name

Target nation

Acquirer name

Acquirer nation

Status

Deal value*

Category

06/05/19

Pregis LLC

United States

Warburg Pincus LLC

United States

Completed

1,300

Flexible Packaging and Miscellaneous Products

05/10/19

Fajar Surya Wisesa Tbk PT

Indonesia

SCG Packaging PCL

Thailand

Completed

941

Flexible Packaging and Miscellaneous Products

04/16/19

Recticel Sa-Insulation and Flexible Foams Divisions

Belgium

Kingspan Group PLC

Ireland-Rep

Pending

791

Flexible Packaging and Miscellaneous Products

08/11/19

Canfor Corp.

Canada

Great Pacific Capital Corp.

Canada

Intended

744

Forestry

03/19/19

Qidong Singamas/Qidong Pacific Port/Qingdao Pacific Container/Ningbo Pacific/Singamas Container

China

COSCO SHIPPING Financial Co., Ltd.

China

Pending

596

Flexible Packaging and Miscellaneous Products

04/22/19

Essel Propack Ltd.

India

Epsilon Bidco Pte Ltd.

Singapore

Pending

401

Flexible Packaging and Miscellaneous Products

06/25/19

Amcor PLC-Plants(3)

United Kingdom

Kohlberg and Co. LLC

United States

Completed

394

Flexible Packaging and Miscellaneous Products

04/08/19

Harvard Management Co. Inc.-Timberland

Uruguay

Bosques Del Uruguay IV

Uruguay

Completed

330

Forestry

03/14/19

Carton de Colombia SA

Colombia

Smurfit Kappa Group PLC

Ireland-Rep

Pending

319

Paper and Fiber Based Products

07/22/19

Clariant AG-healthcare packaging business

Switzerland

Arsenal Capital Partners LP

United States

Pending

314

Flexible Packaging and Miscellaneous Products

Source: Thomson Reuters and other publicly available sources. *In Million USD


FPP deals outlook

Escalating trade tensions between the US and China, uncertainty around Brexit and fears of a looming recession have created an environment where investors are expected to continue to exercise caution when evaluating M&A opportunities.

However, these disrupting factors can not be ignored, and industry players must focus on mitigating any negative impacts, particularly to their supply chain. On a positive note, high levels of available cash on both corporate balance sheets and private equity funds, cheap debt, and the continued focus on portfolio rationalization present some optimism for M&A looking forward.   

Forestry could become more active as global participants continue to seek readily available, low cost fiber. Flexible packaging should remain an attractive sector category as consumer demand for environmentally friendly alternatives increases. The e-commerce economy, demand for quality consumer packaging, and corrugated shipping cartons should continue to increase and present opportunity.

Prior period consolidation activity, particularly in North America may result in more divestiture activity as company’s look to rationalize non-core assets. Technology 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. 

About the data

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 October 1, 2016 and September 30, 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.

Contact us

Max Blocker

US and Global Forest, Paper and Packaging Leader, PwC US

Harry Gruits

Forest, Paper and Packaging Deals Leader, PwC US

Jason Boyer

Canada Forest, Paper and Packaging Deals Leader, PwC Canada

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