Given the difficult economic environment and restricted credit markets, total deal value in the forest, paper and packaging (FPP) sectors held up remarkably well last year due to blockbuster transactions in Latin America, according to a new report by PricewaterhouseCoopers (PwC).
Overall deal volume remained fairly stable in 2009, with 369 deals slightly topping the 350 seen in 2008. Deal value dropped to US$18.7bn in 2009 from 2008’s US$21.3bn. Private equity activity was also down, accounting for only 11% of deal values, compared to an average of 27% over the previous five years.
PwC’s ‘Branching Out 2009 Annual Review’, which studies mergers and acquisitions (M&A) in the FPP sectors showed that continued tight credit conditions and low valuations cast an overall damper on FPP transaction activity, particularly in North America, where deal values dipped to around US$1bn and the focus shifted to restructuring high debt levels with a total face value reaching US$17.5bn.
Already-modest deal values in Asia-Pacific were slightly down in 2009, although deal volume stayed solid, largely due to interest in timberlands. The notable bright spot globally was Latin America, where pent-up demand and a quicker recovery helped spur an unprecedented level of deal activity, accounting for around two-thirds of global deal value, up from 5% in 2008. Two of the regions’ biggest players, Votorantim Celulose e Papel (VCP) and Aracruz, merged in a deal value at close to US$8bn to form Fibria, the world’s largest pulp company by some margin.