What impact are major packaging mergers having on the industry?

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Introduction

In the past year, the packaging industry has seen a wave of high-profile merger and acquisition (M&A) activity, notably involving Mondi, DS Smith, International Paper, Smurfit Kappa, and Suzano. This report explores why these large-scale deals matter, what they signal about industry maturity, and how they could reshape the packaging value chain.

Key Takeaways

• Major M&A stories signal consolidation: Deals like the Smurfit Kappa–Westrock merger and the ongoing International Paper–DS Smith–Suzano saga reflect an accelerating trend of industry consolidation, especially in paper-based packaging.
• Industry is entering a “shakeout” phase: As with automotive and oil sectors historically, packaging may be shifting from fragmentation to consolidation.
• Big deals bring big scrutiny: Transformational mergers trigger regulatory concerns over market dominance, supply control, and even national security, especially in the EU and U.S.
• Success isn’t guaranteed: Over 60% of large M&As destroy shareholder value, according to Harvard research. The risks are high, even for strategic deals.
• Market pressures can fuel a domino effect: Competitors may feel compelled to pursue their own M&As to stay competitive, accelerating consolidation across the sector.
• Future deals must align with ESG goals: Long-term environmental and governance priorities are now central to M&A strategy—but leadership incentives often still favour short-term financial wins.

Conclusion

The recent surge in M&A activity hints at a maturing packaging industry—and possibly the start of a new consolidation wave. While optimism is returning, success hinges on strategic fit, regulatory approval, and a long-term vision. Companies looking to lead must balance financial ambition with sustainable, stakeholder-focused growth.

In the past year, major packaging companies such as Mondi, Smurfit Kappa, DS Smith, International Paper, and more have been linked to potential mergers or acquisitions. In this report we take a closer look at how and why mergers like this happen and discuss the general implications for the sector as a whole and the wider value chain.

The subject of this article is mergers and acquisitions – particularly the effect that large mergers can have on any industry sector, why they can be so significant and how they can reflect the current economic context.

Why is this relevant to us, as a packaging-focused media company? As many of our readers will know, we like many others have been following the ongoing Mondi / DS Smith / International Paper / Suzano acquisition saga which – however it might turn out in the end, or not as the case may be – has the potential to create a global paper giant with repercussions for the entire packaging value chain.

We won’t go into lengthy detail on the twists and turns of the story here as our readers can find all the updates we’ve published throughout the year on the news section of the Packaging Europe website.

But to give a brief recap: back in February this year, Mondi expressed an interest in acquiring DS Smith; subsequently, in March International Paper entered the field with an offer of its own to buy DS Smith. It didn’t end there. We then learned that International Paper itself was potentially being acquired by Brazilian paper producer, Suzano – something which could have derailed the potential DS Smith acquisition.

As of writing (July 2024), the latest in this tale is that Suzano has backed out of the International Paper acquisition, again leaving the field open for IP’s potential acquisition of DS Smith.

And this was by no means the only big merger story in the packaging space from the past year. Back in September 2023 we first head talks of a potential merger between Smurfit Kappa and Westrock, two major players in the packaging sector, which has now come to fruition with the formation of Smurfit Westrock.

While we obviously don’t yet know the ultimate outcome of the International Paper / DS Smith story, watching both these stories develop raised the wider – dare we say it even naïve – question of why such truly ‘transformational’ deals create such a stir across the industry.

To do this (not being experts on economic theory ourselves) we called upon an expert to give his take – Tim Galpin, Senior Lecturer in Strategy and Innovation at the Saïd Business School at the University of Oxford, and a business consultant, as well as the author of six management books. (For those who want to hear the conversation we had with him, you can listen to the podcast here.)

A shift in packaging?

“In their early stages industries are typically very fragmented but at some point there will be what’s called an accelerated growth and shakeout period,” says Tim. “The small operators can do OK for a while, but then they reach their growth potential; they need more capital, more global reach, bigger distribution systems. Look at the auto industry: 100 years ago there were hundreds of auto manufacturers and then a lot of them were swallowed up until today we’re essentially down to a handful of global auto manufacturers. The same thing has happened in mining and oil.”

And is packaging now reaching this point? There has definitely been a shift. Yes, there are still plenty of small players scattered around the globe in niche areas of innovation, but there has been a definite upsurge in M&A activity where big players in areas such as polymers, papers, chemicals and so on have – or are – consolidating. According to a recent report by Bain, for example, the paper and packaging sector alone has seen 2000 M&A transactions since 2007.

Paper packaging is illustrative of this: DS Smith has grown through acquisition to become one of the world’s largest players in the paper industry, and now it is itself potentially being bought out, creating further consolidation.

Why these stories matter

Let’s not forget, as Tim Galpin says, that industry assets change hands all the time on a smaller scale. But a bigger company gradually buying out smaller players is not generally big news – they simply become absorbed into the operations rather than creating a real market shift.

It’s usually only the bigger mergers between two major players of comparable size that are picked up by the international business news – your Financial Times, Wall Street Journal and so on. Such potentially seismic deals can sometimes create unease across an industry. Why is this?

“To begin with,” says Tim, “from the regulators’ perspective, they don’t like too few players have the market power in any industry. That was the original reason for the antitrust regulations being established in the US, for example, which in the oil industry led to the breaking up of Standard Oil and the forming of Exxon and Mobil and the other oil conglomerates. And a lot of regulators are even more aggressive these days, not just from a market power perspective but in terms of national security. The umbrella used to be aerospace and weapons, but now anything to do with data infrastructure is scrutinized by regulators.

“In the same way, the EU tries to prevent too much market power, control of supply, prices etc. in too few hands, so the regulators will be looking carefully at possible deals like International Paper–DS Smith and they may need to make concessions and dispose of some assets.”

Also, he says, once you are looking at a transformational deal between two large companies of relative size, the risk goes up for both sides as a lot of them can actually erode value.

This was demonstrated a few years ago in a study by the Harvard Business Review, which analysed 2500 high-profile M&A deals and found that more than 60% of them destroy shareholder value. Success, in short, is by no means assured.

Aside from competition laws and risks to the participating companies themselves, these deals can of course also cause concern among other players in the same market, which can accelerate the overall market consolidation process because they feel pressure to make similar deals or risk getting left behind; a kind of economic arms race or a zero-sum game. We can see, then, that there’s a lot more at stake with these mergers than the individual deal itself.

The need for ‘European champions’

Despite legitimate concerns around monopolization, many believe that in Europe a greater amount of M&A activity is necessary in order to compete with the global players. Indeed, there are questions whether competition laws should be revised to encourage innovation.

“There’s a lot of talk in the business press recently about trying to create European ‘champions’ but in order to do this they have to get through EU Commission regulatory approvals. The EU system is fragmented, with each country having its own regulatory approvals. We saw that a few years ago in the rail industry, for example, with the proposed Siemens-Ahlstrom merger that was blocked by the EU.

“So, on the one hand, Europe wants to create these European champions that can go and compete globally with the big players in Asia, the US and so on; but regulatory complexity has prevented that. So there is some suggestion that regulators may let some of these big mergers go through in future to enable European companies to compete more on a global scale, although the proof of that is yet to be seen.”

Taking the long view

Leaving the issue of competition aside: given the more-than-pressing environmental and socio-economic problems the world is facing, it’s vital that companies, whatever their size or global standing, should approach any deals with an eye on long-term environmental, social and governance (ESG) goals rather than any short-term gains.

“Thirty years ago, when I first got into this field, ESG wasn’t even part of the vocabulary,” says Tim. “Today it’s a topic in almost every deal. That’s actually why a lot of previously publicly traded companies have gone private – to get away from the quarterly financial scrutiny from the shareholders and be able to take a more long-term view.

“It comes down to leadership too: the average tenure of the CEO in most Western companies is about five years. Obviously, when a new leader comes in they have to make a new mark, and the current leader is measured to a large extent on share performance so they will want to grow the earnings per share.

“You’ve seen this in various industries like with AB InBev growing rapidly through acquisition because their CEO was incentivized to do that. There’s the old saying: Show me the incentive and I’ll show you the behaviour.”

The rise of private equity has also taken a lot of previously public companies into the private sphere. But you could argue, he says, that even some of these scenarios are focused on the short-term gains as the private equity exit time is generally about 5-7 years, so unfortunately it’s not simply a case of ‘private = responsible +future-focused’, either.

Are we seeing an upswing?

Finally, more generally, we’re interested in how the evolution of M&A activity can be broadly indicative of the state of a particular market as a whole.

“Deals come in waves,” says Tim. “So when the global economy is rising of course you’ll see that the transactions taking place are a reflection of that. And then you’ll see valleys – so there was about a 10-year M&A wave after the crash of 2008-09 which lasted for about 10 years until COVID hit. During COVID there were obvious winners and losers; the packaging sector did quite well because delivery of goods became more important. Overall though, last year was the worst we’ve had in terms of M&A for over a decade.”

But what of the recent reports we’ve heard of a potential ‘upswing’ in M&A activity after a period of stagnation? In the packaging sector, for one, there’s the sense that the stories we opened this report with suggest that the trend is now upwards again. Tim says that there is reason for (tempered) optimism.

“Things have started to pick up in the first half of 2024; you’re seeing some bigger deals announced, or at least pursued like International Paper and DS Smith [n.b. and as we noted above, quite apart from the overall market perspective, there is a general shift in the packaging market towards consolidation as its different branches mature]. Depending on where you are, there’s a lot of money out there both in the private and public markets. But the jury’s still out on whether this is really the start of another M&A wave. It’s ticking up, but it’s not full steam ahead at this point.”

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