CHICAGO,
January 6, 2009 – BMO Capital Markets, the investment
and corporate banking arm of BMO Financial Group (NYSE, TSX: BMO),
has released its third annual report on packaging M&A 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 last several years.
“The last year has been a challenging year for M&A activity
in the packaging industry in terms of deal volume, valuations, and interest
among all types of acquirers,” said Doug Lawson, Managing Director
and Head of the BMO Capital Markets packaging practice.
“After a record setting year in 2007, the M&A environment
was affected by challenging market conditions in 2008. The credit crisis
and a difficult economic environment combined with unprecedented spikes
in resin, oil and paperboard prices resulted in a significant slowdown
in packaging M&A activity,” Lawson added. “While we expect
the challenging conditions to persist in 2009, we believe that packaging
industry fundamentals remain attractive over the medium-to-long term
and the strong rationale for consolidation in the packaging sector continues
to exist.”
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 slow-down 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.
- A Variety
of Restructuring-Related Transactions Were Announced
In the second half of 2008, several restructuring-related acquisitions
were announced as heavy debt levels were aggravated by the challenging
economic and financing environment combined with high commodity prices.
About the BMO Capital Markets Packaging Group
The BMO Capital Markets Packaging Group has substantial transaction experience
across the broad spectrum of the packaging industry. The group has
led numerous M&A and financing transactions of packaging companies.
The team has significant experience in representing public, private
and private-equity owned companies across a variety of packaging sub-sectors,
including Rigid, Flexible, Paperboard, Labels, Contract Packaging and
Packaging Machinery.
To request a copy of the Mergers & Acquisitions
in the Packaging Industry: Annual Deal Review or to subscribe to The
Converter, a monthly
BMO newsletter which reports on the activities and trends shaping this
industry, please visit
www.bmocm.com/industry/packaging or send an email to Doug Lawson at doug.lawson@bmo.com
or Laura Hubbard at laura.hubbard@bmo.com.
For media interviews with one of our Packaging Group experts please
contact Orli Namian, BMO Financial Group, orli.namian@bmo.com, (416) 867-3996
About BMO Capital Markets
BMO Capital Markets is a leading full-service North American financial
services provider, with over 2,000 employees operating in 14 North
American offices and 26 worldwide, offering corporate, institutional
and government clients access to a complete range of investment and
corporate banking products and services. BMO Capital Markets is a member
of BMO Financial Group (NYSE, TSX: BMO), one of the largest diversified
financial services providers in North America with more than US$416
billion total assets and more than 37,000 employees as at October 31,
2008.
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