Packaging M&As to rebound in 2010?

It’s clear that 2009 was another down year in terms of packaging-industry mergers and acquisitions due to a laundry list of reasons. BMO Capital Markets’ just-released 5th annual report, “Mergers and Acquisitions in the Packaging Industry: 2009 Annual Deal Review,” provides the nitty-gritty on our field’s M&A activity by sector, geography, acquirer type, size, and valuations.

Here are some of the highlights (or lowlights, as it were):

2009 Global M&A volume declined from the ten-year low of 2008: There were 169 announced transactions last year, a decline of 33% from the 251 announced transactions of 2008 and a 56% decline from the record-setting level of 386 at the peak of the M&A market in 2007.

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 41% and 40% of deals in 2009, respectively. North American packaging- deal volume declined 19% with 16 fewer transactions last year (69 deals) than 2008 (85 transactions).

All Sectors Were Affected by Market Conditions in 2009: Transaction activity by converted-product sector was similar to previous years. Flexible packaging had 22% of deal volume, and paperboard had 19%. The remainder of activity was split between labels, machinery, and other packaging. While things slowed down all over, paperboard packaging had the most significant decline.

Strategic Acquirers Continued to Account for the Majority of Transaction Volume: Buying companies just because you want to and have the money for it became more and more a thing of the past. Now, strategic acquirers continue to lead M&A volume in the packaging industry, with 119 transactions or 70% of announced deals last year (versus 165 deals in 2008 or 66% of announced volume). Private companies made more acquisitions in 2009 (85) than public companies (34). Private-equity firms made up the remaining 50 deals or 30% of transactions.

Will packaging-industry M&As rebound in 2010? “The challenging conditions that plagued 2008 and 2009 have begun to improve,” says Doug Lawson, managing director and head of BMO Capital Markets packaging practice, “and we believe that positive packaging-industry fundamentals and the strong rationale for consolidation in the packaging sector will begin to spur a recovery in deal activity in 2010.”

Want a copy of the BMO report? More info: www.bmocm.com/industry/packaging