The long run impact of mergers and acquisitions on performance – empirical study in the pulp and paper industry

Mergers and acquisitions (M&A) have played very important role in restructuring the pulp and paper industry (PPI). The poor performance and fragmented nature of the industry, overcapacity problems, and globalisation have driven companies to consolidate. The objective of this thesis was to examine how PPI acquirers’ have performed subsequent M&As and whether the deal characteristics have had any impact on performance. Based on the results it seems that PPI companies have not been able to enhance their performance in the long run after M&As although the per-formance of acquiring firms has remained above the industry median, and deal characteristics or the amount of premiums paid do not seem to have had any effect. The statistical significance of the results was tested with change model and regression analysis. Performance was assessed with accrual, cash flow, and market based indicators. Results are congruent with behavioural theory: managers and investors seem to be overoptimistic in determining the synergies from M&As.

Diversification and its reflections on profitability - strategic change in pulp and paper industry in the years 1996 and 2006

The purpose of the thesis was to analyze diversification in pulp and paper industry (PPI), which is an industry facing enormous strategic challenges as many of the basic parameters of its operational environment are rapidly changing. The objective was to explore, how PPI companies have reacted to these changes by adjusting their strategies in terms of diversification and how the adjustments have affected their profitability. The study was statistical in nature. The results indicate that PPI companies in deed had reduced the degree of unrelated and related diversification , but the positive performance implications of the changes were debatable. In light of the data used in the study lower level of diversification did not lead to better profitability, in fact, the companies with the highest level of diversification had the best profitability. By contrast, reducing the level of unrelated diversification improved the profitability development; whereas reducing the level of related diversification deteriorated the profitability of the company. The results were not statistically significant and they cannot be generalized outside the data of the study.

Impact of Investment Strategies on Performance in Pulp and Paper Industry

The main objective of this study was to examine, what kind of investment strategies the leading European and North American pulp and paper industry companies (PPI) used in 1991-2003, and how the selected strategies affected their performance. The investment strategies were categorised in three classes including mergers and acquisitions, investments in new capacity and investments in existing capacity. The results showed that mergers and acquisitions represented the largest share of total investments in 1991-2003 followed by investments in existing capacity. PPI companies changed investment strategies over time by increasing the share of mergers and acquisitions, which decreased investments in new capacity especially among North American companies. According to the results, good asset quality and investments in new and existing capacity provided better profitability than often expensive acquisitions. Also the capacity decreases had a positive impact on profitability. Average asset quality and profitability were higher among European companies. The study concluded that in the long term the available value creating investment opportunities should limit capital expenditure levels, not the relation of capital expenditure to depreciation.

Fiber flows in global paper and pulp industry. A panel data approach.

The purpose of this thesis is to study factors that explain the bilateral fiber trade flows. This is done by analyzing bilateral trade flows during 1990-2006. It will be studied also, whether there are differences between fiber types. This thesis uses a gravity model approach to study the trade flows. Gravity model is mostly used to study the aggregate data between trading countries. In this thesis the gravity model is applied to single fibers. This model is then applied to panel data set. Results from the regression show clearly that there are benefits in studying different fibers in separate. The effects differ considerably from each other. Furthermore, this thesis speaks for the existence of Linder’s effect in certain fiber types.

Growth Strategies in Pulp and Paper Industry: An Empirical Investigation on Profitability Effects

This study investigates whether there are differences in profitability of PPI companies based on the growth strategy they have chosen to follow. It is examined whether those companies following organic growth strategy are more profitable than those companies following acquisitive growth strategy. It is also investigated are ones larger than the others, or are ones growing faster than the others. Also, the factors affecting the profitability of acquisitive companies are further examined. The results showed that there actually are differences between the two groups. Organically grown companies were found to be more profitable, smaller and growing slower than acquisitive companies. When it comes to examining only acquisitive companies there could be found factors that better or worsen the profitability of companies. For example targets that the company has bought in developing markets were making them more profitable.

Regenerated cellulose ultrafiltration membranes in the treatment of pulp and paper mill process waters

Ultrafiltration (UF) is widely applied in different separation processes in the pulp and paper industry. The growing need to protect the environment, a lack of pure water and an interest in producing high-value chemicals from compounds present in process waters will probably lead to an increase in the use of UF in the pulp and paper industry. The efficiency and cost-effectiveness of a UF process depends on the applied membrane. The membrane should have a high and stable filtration capacity, a particular selectivity and a long operational lifetime. To meet these requirements a membrane should have a low fouling tendency. In addition, it should withstand the prevailing operational and chemical conditions. This thesis evaluates the performance and applicability of the regenerated cellulose (RC) membranes 00030T and C2 in the treatment of pulp and paper mill process waters based on the requirements above. The results demonstrated that both the tested RC membranes fulfilled well the requirement of high filtration capacity. In addition, in the filtration of a paper mill clear filtrate (CF) the RC membranes were not as greatly affected by variations in the CF quality as a polysulphone membrane. Furthermore, due to their extreme hydrophilicity and weak charge the fouling tendency of the membranes can be expected to be low in pulp and paper mill filtration applications. It is, however, known that fouling cannot be totally avoided even when the membrane is chosen very carefully. This study indicated that carbohydrates influenced negatively on permeability and caused fouling in the filtration of groundwood mill circulation water. Thus, a pre-treatment effectively reducing the amount of carbohydrates might help to maintain a stable capacity. However, the results of the thesis also showed that the removal of some of the possible foulants might just increase the harmful effect of others. Multivariate examination was useful in the understanding of the complicated factors causing the unstable capacity. The thesis also revealed that the 00030T and C2 membranes can be used at high pressure (max. tested pressure 12 bar). The C2 membrane, having a sponge-like substructure, was more pressure resistant, and its performance was more stable at high pressure compared to the UCO30T membrane containing macrovoids in its substructure. Both tested membranes can, according to the results, also be used at temperatures as high as 70°C in acidic, neutral and alkaline conditions. However, the use at extreme conditions might cause faster ageing of the membranes compared to ageing in neutral conditions. The thesis proved that both the tested RC membranes are very suitable for pulp and paper mill applications and that the membranes can be utilised in processes operating in challenging conditions. Thus, they could be used in more demanding applications than supposed earlier.

Quality potential of DIP and hardwood CTMP based raw materials in woodcontaining printing paper

The objective of the thesis was to define the quality potential of DIP and hardwood CTMP based raw material furnish for a printing paper production and to define the end product's pulp-based boundary conditions especially when thinking of Chinese markets. Although the Chinese paper industry expands rapidly, the production of some paper grades is still exiguous. Especially the softwood resources are limited in Asia, thus the purpose of the thesis was to find out the possibilities to produce printing paper in China from local raw materials. Bleached CTMP can be produced, for example, from fast-growing hardwood species like eucalyptus and poplar. Therefore in this thesis it was examined if good quality printing paper is possible to produce by using deinked pulp and hardwood CTMP based furnish. In the first section of experimental part, various deinked pulps and chemithermomechanical pulps were compared. The deinked pulps were from China, Central Europe and Finland. Central European was made for magazine papers, and the Chinese as well as the Finnish pulps were made for newsprints. Two of the BCTMPs were from China and those both were made from poplar, whereas one BCTMP was made from eucalyptus in a pilot plant. There were significant differences especially between BCTMPs and their paper properties. In the second section of experimental part, the deinked pulp and eucalyptus BCTMP were blended to produce handsheets. The results show that producing the highest quality printing paper would be difficult from these raw materials. Deinked pulp affected especially the strength and optical properties as well as calender blackening. The BCTMP was found to have effects mostly on the smoothness, strength and optical properties as well as calender blackening.

Wavelets in real-time paper web analysis

Online paper web analysis relies on traversing scanners that criss-cross on top of a rapidly moving paper web. The sensors embedded in the scanners measure many important quality variables of paper, such as basis weight, caliper and porosity. Most of these quantities are varying a lot and the measurements are noisy at many different scales. The zigzagging nature of scanning makes it difficult to separate machine direction (MD) and cross direction (CD) variability from one another. For improving the 2D resolution of the quality variables above, the paper quality control team at the Department of Mathematics and Physics at LUT has implemented efficient Kalman filtering based methods that currently use 2D Fourier series. Fourier series are global and therefore resolve local spatial detail on the paper web rather poorly. The target of the current thesis is to study alternative wavelet based representations as candidates to replace the Fourier basis for a higher resolution spatial reconstruction of these quality variables. The accuracy of wavelet compressed 2D web fields will be compared with corresponding truncated Fourier series based fields.

Catalytic Wet Oxidation of Paper Mill Debarking Water

The objective of the research was to study the influence of temperature, oxygen pressure, catalysts loading and initial COD concentration of debarking wastewater on the pollutants during the catalytic oxidation. More importantly, how the addition of catalyst affects the wet oxidation process. The whole work was divided into two main sections, theoretical and experimental parts. The theoretical part reviews the pulp and paper industry from wood processing to paper production as well as operations that generate wastes. Treatment methods applicable for industrial pulp and paper mill effluents were also discussed. Wet oxidation and catalytic wet oxidation processes including mechanism, reactions, kinetics and industrial applications were previewed. In the experimental part, catalytic wet oxidation process were studied at 120-180°C, 0-10 bar oxygen pressure, 0-1 g/L catalyst concentration and 1000-3000 mg/L initial COD concentration. Responses, such as Chemical oxygen demand (COD), Total organic carbon (TOC), colour, lignin/tannin, Biochemical oxygen demand (BOD) and pH were measured. In the experiment, the best conditions occurred at 180°C, 10 bar, l g/L catalyst concentration and 3000mg/L initial COD. At these conditions; 74% COD, 97% lignin/tannin, 54% TOC, 90% colour were removed from the wastewater. pH was greatly reduced from 7 to 4.6. Lignin/tannin was removed most. Lignin/tannin showed linear dependency with colour during oxidation. Temperature made the most impact in reducing contaminants in debarked wastewater.

Market Opportunities for Paper Industry in Radio Frequency Identification

The paper industry has been experiencing remarkable structural changes since paper demand growth has ceased and some markets are declining. One reason behind the declined demand is the Internet, which has partially substituted the newspaper as a source of information. Paper products alone can no longer provide livelihood, and the paper industry has to find new business areas. In this research, we studied radio frequency identification (RFID), and the market opportunities it could provide for paper industry. The research combined a quantitative industry analysis and qualitative interviews. RFID is a growing industry in the beginning of its life cycle, in which value chains and technologies still evolve significantly. The industry is going to concentrate on the future, and in the long term RFID-identifiers will probably be printed on paper substrate or directly onto products. Paper industry has the chance to enter the RFID industry, but it has to obtain the required competences, for example through acquisitions. The business potential RFID offers to paper industry is inadequate, and while reviewing new strategic options, the paper industry must consider more options, for example the entire printed intelligence.

Three Wavelength Optical Probe for Surface Roughness Measurements of Paper Samples

In the present diploma work optical inspection methods were used to investigate surface roughness of paper samples. A special measurement setup, which includes three laser light sources of three different wavelengths, photodetector and goniometer, was used to measure the reflected laser light properties. The intensity of the light reflected in specular direction was measured versus the laser incidence angle for reference metal sample. The value of roughness was estimated and compared to initially known value of metal sample roughness. Thus, the measurement equipment and method were validated. Then the reflected intensity was measured versus reflection angle at constant incidence angle for the same metal sample and paper samples under investigation. The final values of the surface roughness were obtained from the analysis of the reflected intensity dependence. The results are in good correlation with other research groups.

Kalman Filtering in Online Paper Quality Assessment

Controlling the quality variables (such as basis weight, moisture etc.) is a vital part of making top quality paper or board. In this thesis, an advanced data assimilation tool is applied to the quality control system (QCS) of a paper or board machine. The functionality of the QCS is based on quality observations that are measured with a traversing scanner making a zigzag path. The basic idea is the following: The measured quality variable has to be separated into its machine direction (MD) and cross direction (CD) variations due to the fact that the QCS works separately in MD and CD. Traditionally this is done simply by assuming one scan of the zigzag path to be the CD profile and its mean value to be one point of the MD trend. In this thesis, a more advanced method is introduced. The fundamental idea is to use the signals’ frequency components to represent the variation in both CD and MD. To be able to get to the frequency domain, the Fourier transform is utilized. The frequency domain, that is, the Fourier components are then used as a state vector in a Kalman filter. The Kalman filter is a widely used data assimilation tool to combine noisy observations with a model. The observations here refer to the quality measurements and the model to the Fourier frequency components. By implementing the two dimensional Fourier transform into the Kalman filter, we get an advanced tool for the separation of CD and MD components in total variation or, to be more general, for data assimilation. A piece of a paper roll is analyzed and this tool is applied to model the dataset. As a result, it is clear that the Kalman filter algorithm is able to reconstruct the main features of the dataset from a zigzag path. Although the results are made with a very short sample of paper roll, it seems that this method has great potential to be used later on as a part of the quality control system.

Fouling management and retention in nanofiltration of integrated paper mill effluents

Nanofiltration performance was studied with effluents from the pulp and paper industry and with model substances. The effect of filtration conditions and membrane properties on nanofiltration flux, retention, and fouling was investigated. Generally, the aim was to determine the parameters that influence nanofiltration efficiency and study how to carry out nanofiltration without fouling by controlling these parameters. The retentions of the nanofiltration membranes studied were considerably higher than those of tight ultrafiltration membranes, and the permeate fluxes obtained were approximately the same as those of tight ultrafiltration membranes. Generally, about 80% retentions of total carbon and conductivity were obtained during the nanofiltration experiments. Depending on the membrane and the filtration conditions, the retentions of monovalent ions (chloride) were between 80 and 95% in the nanofiltrations. An increase in pH improved retentions considerably and also the flux to some degree. An increase in pressure improved retention, whereas an increase in temperature decreased retention if the membrane retained the solute by the solution diffusion mechanism. In this study, more open membranes fouled more than tighter membranes due to higher concentration polarization and plugging of the membrane material. More irreversible fouling was measured for hydrophobic membranes. Electrostatic repulsion between the membrane and the components in the solution reduced fouling but did not completely prevent it with the hydrophobic membranes. Nanofiltration could be carried out without fouling, at least with the laboratory scale apparatus used here when the flux was below the critical flux. Model substances had a strong form of the critical flux, but the effluents had only a weak form of the critical flux. With the effluents, some fouling always occurred immediately when the filtration was started. However, if the flux was below the critical flux, further fouling was not observed. The flow velocity and pH were probably the most important parameters, along with the membrane properties, that influenced the critical flux. Precleaning of the membranes had only a small effect on the critical flux and retentions, but it improved the permeability of the membranes significantly.

The effect of microfibrillated cellulose addition on drying shrinkage and dimensional stability of wood-free paper

Microfibrillated cellulose (MFC) is known to enhance strength properties of paper. Improved strength usually means increased bonding which is strongly connected to dimensional instability of paper. Dimensional instability is due to changes in moisture content of paper; when paper is moistened it expands and when dried, it shrinks. Hygroexpansion is linked to end-use problems and excessive drying shrinkage consumes strength potential. Effective use of materials requires controlling of these phenomena. There isn’t yet data concerning dimensional stability of papers containing MFC which restricts wider use of MFC. Main objective of the work was to evaluate dimensional stability of wood-free paper containing different amounts of MFC. Sheets were dried with different methods to see how drying strains effected on drying shrinkage and hygroexpansion. Also tensile strength was measured to find out the effect of MFC. Results were compared to sheets containing kraft fines and in some test points cationic starch was used alongside with MFC. MFC increased the dimensional instability of freely dried sheets. As the amounts of MFC increased the effects on dimensional stability became more severe. However the fineness of MFC didn’t play any important role. Both hygroexpansion and drying shrinkage were decreased with cationic starch addition. Prevention of drying shrinkage over powered the effects of additives on hygroexpansion. Tensile strength improved up till 7 % addition amount which could be set as the upper limit of MFC addition when paper preparation and tensile strength are concerned.

Hemicellulose extracted Kraft pulp as a raw material of paper

The transformation of a traditional pulp mill into an integrated forest biorefinery utilizing wood-derived biomass presents a promising opportunity for enterprise revival of the pulp and paper industry by offering new sources of revenue and significantly improved industry profitability. One proposed next generation process step for an integrated forest biorefinery is the extraction of hemicelluloses, allowing the co-production of pulp and ethanol or chemicals. The extraction of hemicelluloses, however, will likely have downstream effects on pulp quality. In the literature survey an overview of the integrated forest biorefinery and possible next generation technologies implementable in such facility were reviewed. Moreover, some hemicellulose extraction methods suitable for the co-production of pulp and hemicellulose products were looked into in more detail. Also, an overview on the significance of pulp’s hemicellulose content on papermaking properties of pulp fibers was made. In the literature it is stated that the hemicellulose content of pulp affects on many papermaking properties of pulp fibers, hornification and paper strength properties in particular. In the experimental part the goal was to investigate what effects alkaline hemicellulose extraction after bleaching has on the papermaking properties of birch Kraft pulp. It was discovered that tested pulps, normal and hemi-poor birch Kraft pulp, were different in many ways regarding to pulp properties. Differences were observed in both physical and chemical characteristics. Furthermore, clear distinctions were seen in tested paper properties, especially in strength properties, between the handsheets made from hemi-poor or normal birch Kraft pulp. Hemi-poor and normal birch Kraft pulps were also compared as a raw material of laboratory made copy paper. Based on this comparison, usage of hemi-poor birch pulp as the raw material of copy paper does not drastically deteriorate its quality.