Exclusive PFFC Interview with Mesirow Financial's John Chrysikopoulos

NEW YORK, NY | On February 17th, PFFC was given exclusive first rights to publish an announcement regarding the appointment of John Chrysikopoulos to the position of managing director at the New York office of Chicago, IL-headquartered Mesirow Financial. In the following exclusive interview with Chrysikopoulos, PFFC's editor/associate publisher Yolanda Simonsis asked about the significance of his appointment and learned how he anticipates the merger and acquisition market for the paper and packaging industries to take shape in light of global economic challenges.
Simonsis: In light of all the global economic turmoil that's transpired and how seriously this turmoil has impacted lending, what kind of opportunities will you be able to bring to Mesirow as the result of your new appointment?
Chrysikopoulos: The economic environment is very challenging, and the lending environment is very difficult. Having said that, there are still a number of companies that will have challenges either because of the economy, or they will have issues because they must refinance their balance sheets. Those companies will be forced - again either because the economic conditions aren't all that favorable or they have to refinance their balance sheets - to take action, and that might mean they'll have to sell divisions, or sell themselves, or restructure. That's one big area of opportunity, and there are a number of competitors that are waiting for those opportunities. They are eager to find the right company under the right circumstances so they can acquire good quality assets at very attractive prices. So it presents opportunities for both the companies having issues that must divest businesses or restructure their balance sheets, or, on the other hand, for companies that are eager to acquire those divisions or the entire companies.
Simonsis: That makes sense. Then how do you anticipate the newly agreed upon stimulus plan will impact M&A activity and the health of the paper and packaging industry at large?
Chrysikopoulos: It will be positive when the impact starts to be felt in the economy because, again, it will help the demand side, it will help the pricing hopefully, and the cash flow generation of those companies. So the environment is going to experience improved lending conditions, and the companies that don't have access to the capital market will be able to borrow money either to refinance or make acquisitions. So in the near term there will be more opportunities because they [i.e., companies] are going to be forced to undertake some actions longer term. The opportunities will be there because the economy and the financing conditions are helpful, [which is] very similar to what the industry experienced 12 months ago, two years ago, and four years ago.
Simonsis: So do you expect that the valuations of some of these companies will be impacted negatively?
Chrysikopoulos: Right now, yes. Right now valuations are lower than they were historically. Valuations are also impacted because there are few buyers. The stock market is down. There are few buyers, and the economic and lending conditions are very challenged. As the economy and the stimulus plan and package start to help the economy and the economy starts to do better as the industry starts to improve - and hopefully the stock market starts to recover - the valuations are going to improve.
Simonsis: How long do you anticipate, say if the stimulus package is
implemented tomorrow, it's going to take to have an effect?
Chrysikopoulos: I'm not quite sure that I have the right answer. . . The hope or the expectation is that we'll start seeing some benefit before the end of this year, but certainly by next year.
Simonsis: Well that's encouraging! One last question: What do you foresee in the paper and packaging industry for 2009 in terms of M&A activity specifically?
Chrysikopoulos: I think it will be below historical averages and relatively slow, at least in the early part. Because the only activity will be driven by the companies that are forced to take some action because of what I discussed before. . . because of the economy, or the balance sheet issues, or the refinancing issues. And in today's environment, if you are a seller, there aren't many buyers and the valuations aren't all that great. So you have to be under a lot of pressure to be forced to sell. As the stock market improves, as the economy improves, as valuations improve, the activity for M&A activity will pick up again.
Simonsis: Congratulations again on your appointment as managing director at Mesirow's New York office.
Chrysikopoulos: I'm obviously very excited and delighted to be joining Mesirow and to help strengthen the very strong franchise they have in the paper and packaging industry.
* Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with $31.4 billion in assets under management and more than 1,100 employees in locations across the country and in London.

Subscribe to PFFC's EClips Newsletter