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Forest products M&A activity holds steady in 2014

Global merger and acquisition activity in the forest, paper and packaging sector in Q4 2014 saw an increase in deal volume and total deal value relative to the third quarter (Q3) of 2014. A total of 34 M&A deals were announced during Q4…

Global merger and acquisition activity in the forest, paper and packaging sector in Q4 2014 saw an increase in deal volume and total deal value relative to the third quarter (Q3) of 2014. A total of 34 M&A deals were announced during Q4 2014 with a total value of US$2.8 billion and an average (mean) deal size of approximately US$83 million, according to management consulting firm PwC. This compares to 26 deals in Q3 with a total value of US$0.5 billion and an average deal size of approximately US$20 million.

Over the full calendar year, there were 125 deals announced in 2014 worth nearly US$9.4 billion, which is in line with 2013 in terms of deal volume (119 deals worth nearly US$16.3 billion) but significantly lower in terms of total deal value and average deal size.

The top transaction of the fourth quarter was Norbord, Inc’s acquisition of Ainsworth Lumber Co. Ltd. for US$976 million.

Jason Boyer, a vice-president in PwC’s Deals practice, said PwC expects the major trends impacting the sector to continue to influence deal making. These include:

• The continued strengthening of the U.S. economy;

• Expectations of slowing growth in China;

• Security of fibre supply.

PwC expects deal making to continue in the sector as companies look to gain strength in core markets.

The distribution of announced deals in Q4 2014 (based on total deal value) was more geographically focused in the Americas region than was the case in Q3 2014. In the Americas, there were 16 announced deals in the quarter with a total deal value of US$1.9 billion. In the Europe, Middle East and Africa (EUMEA) region, there were ten deals with a total deal value of US$0.5 billion. There were eight deals with a total deal value of US$0.4 billion in the Asia-Pacific region.