Consolidation in the European Corrugated Paper Industry
The European corrugated packaging industry, consisting of many players of all sizes, has entered a period of consolidation, according to recent research from Rabobank.
The highly-fragmented European market knows plenty of drivers that support consolidation, ranging from the growing requirements by offtakers to potential succession issues for privately-owned players. There have been 109 notable M&A deals in the industry since 2010.
Smurfit Kappa, DS Smith, and Mondi have been the most active publicly-listed acquirers, but many larger and smaller privately-owned players have also become active. Also, Smurfit Kappa and DS Smith are increasingly looking for opportunities overseas.
Although the pace of M&A activity is accelerating, it has not yet led to the emergence of clear market leaders. The European containerboard and corrugated market is still highly fragmented. The level of vertical integration, from pulp to conversion, is still relatively low; even for the main producers of containerboard. All of this implies that there is plenty of room for further consolidation in the European corrugated packaging industry.
The European containerboard market is comparable with the US market two decades ago, in terms of its level of consolidation and vertical integration. Rabobank expects the current wave of consolidation in the European market to continue. The European market structure is expected to develop in the next 10 to 20 years, becoming similar to the current US market structure. We do, however, believe that change in Europe might not go as fast as in the US. Europe has many family-owned companies that might not yet be ready to sell and has seen some overly high valuations caused by the high pace of M&A activity. At the same time, large European producers will continue to look for ways to enter the high-margin US market.
According to Rabobank F&A Supply Chain Analyst Natasha Valeeva: “All in all, we believe that the European corrugated packaging industry is facing interesting and dynamic times. European companies are not sitting back and waiting for things to happen. Most are actively looking for ways to achieve growth, competitive advantage and increased margins, among others via acquiring valuable assets.”
