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CHICAGO—The paper and packaging industry, usually known for its slow, methodical approach to change, is now scrambling through a high-stakes game of corporate musical chairs. The reason? A curious phenomenon known as the “FOMO effect” (Fear of Missing Out). As paper companies watch their competitors make blockbuster mergers and acquisitions (M&A) deals, they’re gripped by an urgent need to jump on the bandwagon—or risk being left behind in the literal dust of shredded paperwork.
At the recent Paper & Plastics Recycling Conference, the mood was tense, the air thick with the scent of recycled wood pulp. Gabe Hajde, the wry senior analyst from Wells Fargo, led a discussion titled “M&A in Paper & Packaging: How Could it Change the Landscape?” which could just as easily have been called “A Guide to Surviving the Corporate Food Chain While Avoiding Being Lunch.” Joining him were Ryan Fox from Bloomberg LP and Ron Sasine of Hudson Windsor, who both brought their brand of “why are we even still doing this?” humor to the proceedings.
Packaging Industry’s Quest: Not unlike Golem.
A Year of Mega-Mergers
This year has seen mergers and acquisitions that could only be described as the corporate equivalent of binge-eating at a buffet. The most notable deal? An $11 billion merger between Smurfit Kappa and WestRock, forming the new behemoth known as Smurfit Westrock—“which sounds like a law firm for paper mills,” as Hajde pointed out. The company debuted on the New York and London stock exchanges with a flurry of stock price jumps that looked more like the stock market’s version of jittery cat videos than actual trading.
“The FOMO effect is real,” Hajde said with a grimace that suggested he’d just discovered there was no toilet paper left in the bathroom. “No one wants to be the last paper mill standing when everyone else is trying to get their hands on the last roll of Charmin.” He added, “It’s like watching your ex get engaged and wondering if you should crash the wedding. You’re not really invited, but you’re definitely curious.”
The fear is palpable across the industry. The packaging industries quest: Take, for example, the pending acquisition of DS Smith by International Paper (IP). This merger, given a thumbs-up by IP shareholders faster than you can say “EPA regulations,” aims to combine North America’s top dog and Europe’s number two in containerboard production. “It’s like rearranging deck chairs on the Titanic,” Hajde joked. “But this time, at least you get first dibs on the best seats.”
Differing Philosophies and Strategic Moves
As the paper industry consolidates, it’s like watching a group of preteens decide what to do for the summer. Hajde pointed out that some companies are still stuck in the volume-over-value mindset—where mill managers might choose a paper grade based on their preference for paper airplanes over, say, useful toilet paper. “It’s like trying to plan a wedding where nobody can agree on the color scheme,” he explained. “You end up with a lot of fights and a very ugly aisle runner.”
In stark contrast, Smurfit Westrock and Packaging Corp. of America (PCA) have decided to decentralize command. “It’s a more localized business,” Hajde noted. “You can’t just drop a paper mill in the middle of nowhere and hope for the best. You need someone who knows how to order enough coffee to survive a morning meeting.”
These differing philosophies are at the heart of the industry’s evolution—if only because no one’s quite sure what’s going to happen next. Hajde warned, “It’s not just about bigger is better; it’s about creating synergies, optimizing networks, and ruthlessly cutting excess costs. Nobody needs two CEOs unless they’re planning a coup—and even then, it’s usually one too many.”
Ron Sasine, still grimacing at the absurdity of mill closures due to skyrocketing real estate values, added, “When a paper mill sits on prime real estate, it’s worth more as a condo than as a paper factory. It’s like that old saying: ‘One person’s trash is another person’s condo.’” Which, let’s be honest, sounds like a subprime mortgage crisis waiting to happen.
Vertical Integration and the Quest for Value
Vertical integration—once seen as a boring footnote in corporate strategy—is now the talk of the industry. Hajde explained that PCA has been particularly enthusiastic about downward integration, bringing box plants and customization facilities under one corporate umbrella. “It’s like having a family band,” Hajde quipped. “You don’t necessarily need them all, but it’s cheaper to keep them around than to pay a real band.”
As IP’s acquisition of DS Smith looms, Hajde noted, “They’re doubling down on vertical integration as a strategy to create value. Andrew Silvernail, IP’s new CEO, is all about simplifying the organization. Meanwhile, Tony Smurfit of Smurfit Westrock wants to make the supply chain as complex as possible. I suspect the answer is probably somewhere in the middle.”
Sasine added that even though companies are now focused on finding the perfect balance between volume and value, it’s still like trying to herd cats. “It’s not just about economies of scale anymore,” he said. “It’s about finding the sweet spot where you’re big enough to be taken seriously but small enough to avoid the wrath of shareholders when something goes wrong.”
The FOMO Effect: What’s Next?
The “FOMO effect” is turning the paper and packaging industry into a Twilight Zone episode. As companies scramble to stay relevant, the fear of being left out is palpable. “It’s like being at a party where everyone’s drinking fancy cocktails and you’re stuck with a warm beer,” Hajde said. “Nobody likes to be that guy.”
As these trends continue to unfold, Hajde predicts that the M&A frenzy will only accelerate. “We’ve seen this before in the mid-2000s,” he said. “But now, it’s going to hit us with the force of a freight train. Companies that aren’t paying attention will end up as yesterday’s news.”
For now, the industry waits, grappling with the twin demons of fear and opportunity. “It’s like being a teenager,” Hajde said, as he stared off into the middle distance. “You’re trying to figure out who you are, but you’re also worried that everyone else has already figured it out and moved on.”
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