Timberland’s role as an asset class and the burgeoning market for biomass has seen the value of deals in the forest, paper and packaging (FPP) markets increase by US$1.9bn in 2007.
Deal values amounted to US$27.6bn during the year with deal values in forestland/forestry averaging US$188m and US$40m in the wood products market, according to PricewaterhouseCooper’s (PwC’s) Branching Out report.
This was driven by continued investment from private equity firms in the FPP market, as well as new entrants such as the Rank Group, which has taken a change of tack from selling Carter Holt Harvey’s wood products division to acquiring Weyerhaeuser’s wood products manufacturing and distribution business.
However, it is timberland’s ability to offer investors an “environmentally sustainable as well as profitable investment” that will drive future transactions across the world, according to PwC.
This will be aided by the growth in demand for wood-fuelled power, and the access to this market through forestland, forest product companies and supplementary technology.
“While the global credit crunch and uncertain economic outlook do pose challenges there are some fundamental drivers for continued strong deal flow as the industry copes with key challenges,” said Clive Suckling, global FPP leader at PwC.
“These include the need to close unprofitable capacity; cope with maturing markets and enter growing ones; secure a stable, cost-effective fibre supply; and adjust to shifts in global currencies.”
PwC added the first quarter of 2008 has seen deal values “well up” at US$11.8bn, although the outlook for the rest of 2008 remains unclear.
“Developments in financial markets are making for a tougher deal-making environment – on the other hand, 2008 could still emerge as a record-breaking year,” said Mr Suckling.