2009 M&As so far: Another perspective

Chicago-based investment banker Mesirow Financial came out with its Mid-Year Review last week on the nearly non-existent market for packaging mergers and acquisitions. A quick rundown:

On the downside:

► Comparing global M&A activity across all industries for the first halves of 2007, 2008 and 2009 shows that volume in 2009 fell almost 40% from 2008, and was down nearly 70% from 2007. "The credit necessary to finance large, leveraged transactions has simply not been available."

► M&A volume in global packaging follows a similar trend. Transaction volume in the first half of 2009 fell 66% from 2008 and 74% from the heady 2007 levels. In H1 2009, "there was not a single packaging deal announced with a value greater that $1 billion."
 
► The first half of 2009 features several bankruptcies in the paper and packaging industry. "Smurfit-Stone, AbitibiBowater, Fraser Papers, Pliant and Caraustar all filed for bankruptcy." 

► Valuations for packaging companies have come down. The average ratio of enterprise value to EBITDA fell from 8.1X in H1 2007 to only 6.6X in H1 2009. 

On the plus side:

► The stock market appears to have hit bottom, and there are hints the economy is improving. The share prices of nine top paper and plastic packaging stocks are "are up 50% on average from their lows in March."
 
► Share-price and valuations improvement are critical to restoring CEO confidence in the merits of an M&A strategy. "A confirmation of potential M&A recovery is the recently announced acquisition of Alcan Packaging’s Americas business by Bemis Corp. for $1.2 billion."

► Lastly, there’s $400 billion of private-equity money raised but not invested, Mesirow says.

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