Paper Industry M&A — The Consolidation Craze
"It has brought a focus on cost reduction and competition. This provides a significant cost savings to printers," he says.
It's a characterization with which Robert Collins, director of strategic sourcing for R.R. Donnelley & Sons, agrees. "From our perspective, we see consolidation as very beneficial. The reason: Obviously, we're dealing with single business units now versus multiple business units. There is a reconciliation of grades and services being offered from the suppliers. Everyone is going to benefit from that because they are going to focus and improve their sheets and their service levels. We'll know what these mills are now, and we really didn't know before," reports Collins.
However, Dan O'Brien, senior vice president of paper operations for Quebecor World North America, believes that it is still too early to tell.
"Right now, it's so difficult to see what is going on because the market conditions are so weak and the paper companies' business is so bad."
Still, he does see some long-term benefits to consolidation once the market does rebound. "You have a smaller group of suppliers who will have much broader product lines. As consolidation continues to take place, the manufacturers will fill the remaining gaps in their product offerings and you will have larger relationships with fewer paper companies. In the end, they will rationalize both their product lines and their facilities. But, the plans that they are putting in place have not been fully developed or executed yet," O'Brien adds.
Even so, paper industry consolidation activity has had its critics. There are some that claim that quality, availability and service levels have slipped with the loss of the smaller paper companies. Both Collins and Maine attribute this criticism to the growing pains that come when two companies are merged.
"Any time there is a major reorganization and sales offices are combined and we see positions merged or eliminated, there are going to be some short-term problems," cautions Maine.