Will the Last Independent Leaving Our Industry Please Turn Out the Lights?

September 12, 2017

The billboard pictured here appeared in Seattle in April 1971, during a time known locally as the “Boeing Bust.” It was the brainchild of two local real estate developers as a way to put a little humor into the Pacific Northwest’s

dire economic straits of the time. Seeing this billboard, I am reminded of our own industry and the continuing trend of buyouts and mergers among independents,

a phenomenon that might tempt some to paraphrase the message: Will the last independent leaving our industry please turn out the lights?

Of course, I do not believe that independents will disappear from our industry any more than I believe that Congress will actually get anything done this year—but I digress. In fact, as I have written before in these pages, the acquisitions of independent companies show a healthy industry, one that is constantly renewed by players entering, growing, merging, and departing. While the number of independents may be fewer, their share of industry output remains strong. According to the 2016 FBA Annual Report, sheet plants—and these are predominantly independent—have retained a consistent 20 percent of the annual production of corrugated board. In fact, a look at the entire industry shows that as the number of plants has declined by more than 100 in the past seven years—from 1,257 in 2010 to 1,155 in 2016—the annual production of corrugated board has increased from 357 billion square feet to 376 billion square feet. This is a testament to increased productivity and higher output per man-hour.

Acquisitions are not a new development, but the rate at which they are happening is certainly unprecedented. There are many reasons. First, larger companies have

a lot of cash, and improved mill productivity is an incentive to up the ante to acquire companies that can use that tonnage. Second, generational transition is at its highest level, as current baby boomers (themselves second, third, or beyond owners) seek their own exit plans. Third—and this is the most important—independent companies seeking to grow are looking to acquisition, and this is why the future is the most promising. Those companies that continue to invest, to grow, to expand their footprints will be the most successful.

So, what I see in another 10, 20 years is not an industry devoid of independents,

but an industry whose independent sector is as alive and thriving as it is today.

And we’ll leave the light on for you.