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M&A Conference Looks at Packaging Consolidation

ROSEMONT, IL | C-level executives interested in mergers and acquisitions—either as buyer or seller—were in attendance at a day-long seminar organized by AWA Alexander Watson Assoc., Amsterdam, Netherlands. The “Mergers & Acquisitions Executive Forum—Resin and Fiber-Based Packaging, Coating, and Converting Conference” was held June 8 at the Hyatt Regency O’Hare.

The conference was sponsored by Wells Fargo Securities and Blaige & Co. More than 50 people were in attendance.

Morning presenters addressed a well-focused group of general topics covering trends in the specialty converting and coating markets; global consolidation in the packaging sector; and the US economic outlook.

AWA Market Overview: Sector Trends and Future Developments
Dr. William Llewellyn, VP and senior consultant at AWA, gave a market overview of specialty converting sectors—extrusion and vacuum coating and lamination—specifically for North America, where flexible packaging shows the greatest potential for growth. Ongoing consolidation across the supply chain is a threat, as are price pressures and cost constraints.  However, synergies that result from consolidation are an opportunity. Llewellyn reported on trends in labels and medical/pharmaceutical packaging, providing areas of opportunity for converters.

Global Packaging Consolidation: Lead, Follow or Get Out of the Way
Supplier consolidation and customer consolidation are squeezing converters, says Blaige & Co. CEO Thomas Blaige. Converters need to extend their reach to accommodate global customers and must have the proper strategy. He offered insights into how to find and complete a transaction.

US Economic Outlook and Future Prospects
The current state of the economy fell to Prof. Marc Hayford, Loyola Univ. Chicago, who took attendees through the great recession of 2007–2009. The current economic recovery is fragile, he says, providing details on what is needed to sustain it.

Mid-morning presentations then moved to the importance of telling the right story during the M&A process; structuring the deal; and financing considerations.

The Power of Stories: Strategic Narratives as Corporate Imperative
Joseph McCormack, Sheffield Marketing Partners, Downers Grove, IL, covered the pre- and post-announcements of M&As. It is imperative that the strategic message is clear so shareholders understand and get onboard. He explained how to use Narrative Mapping to tell a story that explains corporate strategy.

M&A Trends in 2010
Maryann Waryjas, partner in Katten Muchin Rosenman, says mid-market ($20 Million to $400 Million) activity is increasing. Valuation multiples are down from 2007’s peak but appear to be rising.  The second half of this year will be a strong transaction market. Change in the long-term capital gains rate will be an incentive for sellers to get a deal done in 2010.

Financing Considerations for a Consolidating Industry
Financial markets are open and fully functional, says John Church, managing director of Wells Fargo Securities, but they are fragile. Mergers and acquisitions in packaging are poised for a lot of activity. He explained how banks and debt investors evaluate credit risks of packagers.

Following lunch, two companies—Mondi and CCL Label—shared their strategies for growth through acquisition. Developments in the forest, paper and packaging Industry were presented as well.

Mondi’s Acquisition Strategy in the Release Liner Segment
Filling in for Markus Fuerst, Wolfgang Berger, head of strategy and business development at Mondi, covered the company’s release liner acquisition strategy from 2005–2009, in which time the company completed seven deals. Three keys to their strategy are to build on leading market positions in packaging and uncoated fine paper, particularly in emerging markets; maintain position as the lowest-cost producer, and focus on continuous productivity improvement and cost reduction.

Mergers & Acquisitions in the Label Industry
With 13 transactions since 2002, CCL Label, Toronto, ON, Canada, now has operations on six continents. Geoffrey T. Martin, president, provided insights into CCL’s plan, stating that his company’s global customers drove the strategy.  The large CPG companies want to deal with a global player, not the smaller companies in the fragmented label market. Go where your customers take you, he says.

Developments in the Forest, Paper & Packaging Industry–CEO Perspectives
Ian Murdoch, PriceWaterhouse Coopers, summarized personal interviews with 33 executives in the global FPP industry, which were conducted during late 2009. There is need for further consolidation, vertical and forward integration, improved cost structures, and innovation. Deriving the most value from every tree is key. Bioenergy demand has the potential to deliver much greater value from wood fibre.

A panel discussion, moderated by Thomas Blaige, CEO of Blaige & Co., a sponsor of the event, provided additional insights, with Q&A, on the strategies that led to successful acquisitions, integration, and divestitures. Moderated by Thomas Blaige, the panel included Hilex Poly CEO and president Stan Bikulege, Steve Glick, partner at Lineage Capital, and Michael Kocourek, president, Mid Oaks Investments.

For more information, visit www.awa-bv.com.

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