Boasting four subsidiaries acquired during 2021, Pölkky employs around 420 people across its five Finnish locations and recently reported annual sales of €200 million. The company delivers wood products to customers across 35 countries, with around 70% of its wood products ultimately being exported. Pfeifer intends to retain the company’s management, staff and locations following the completion of the deal, which awaits regulatory approval. This will mean the retention of Petteri Virranniemi from the previous owning family as CEO.
Pfeifer is a market leader in pallet blocks and formwork panels, as well as one of Europe’s largest producers of sawn timber, pellets, framework supports and glued laminated timber. The company employs around 2,200 people across its eight locations in Austria, Germany and Czechia, and projects post-acquisition sales of €1.4 billion in 2023. Prior to its acquisition of Pölkky, 90% of its sales have come from European markets.
Lexia advised Pfeifer on corporate and M&A matters with a team comprising partner Samuli Koskela and counsel Olli Kotila.
An Interview with Samuli Koskela, Lexia
Please tell us more about the acquisition and your team’s role in advising Pfeifer.
Lexia acted as Pfeifer’s comprehensive partner in the arrangements for the acquisition and practically managed the entire team of advisers. Large-scale transactions always involve many areas that require specific expertise, and a successful transaction and smooth project require legal services as well as advising in economic and tax-related matters.
For Lexia’s client Pfeifer, all the necessary support was handled through just one contact, as Lexia managed the whole. In the background, several trusted partners worked as subcontractors, such as Hill Audit as financial adviser and Alder & Sound as legal adviser on tax matters. Lexia’s task was to lead the entire advisory team, report to the head of Pfeifer’s M&A (mergers and acquisitions) department and comprehensively take care of the smooth progression of the project.
We participated extensively in the process in its various stages, and we were also involved in the commercial negotiations with the buyer’s representative. Therefore, throughout the negotiations and the entire business restructuring process, Pfeifer had a very comprehensive partner in Lexia.
What professional skills and experience were you able to bring to the proceedings?
We have more than 20 years of very strong experience in law related to mergers and acquisitions as well as experience in completing large-scale acquisitions. The experience has also given us an ability to move negotiations forward with a solution-oriented approach and, if necessary, lead even a large group of advisors.
Our expertise supported the smooth progress of the acquisition, and we were able to offer our client comprehensive support throughout the entire process. Negotiations require a solution-oriented approach, and with our experience we were able to guide the process as a whole and find solutions that satisfied all the parties involved.
What key steps and potential complications had to be taken into account while advising on the merger of these two wood processing companies across international boundaries?
Both parties to the transaction were family-owned companies, which affects the companies’ decision-making culture and processes. The owners of the companies are close to decision-making, and both parties have a responsibility for their family businesses, which have a long history. In order to find good solutions for all the parties in the negotiations, it was important to understand the companies’ background, history and the deeper motives of both parties.
We participated extensively in the process in its various stages, and we were also involved in the commercial negotiations with the buyer’s representative.
In international trade, two different cultures always meet. On a practical level this can be seen, for example, in legislation-related issues and different cultures of decision-making. In order for the acquisition to be successful, it was important that Lexia was able to act between the parties as an interpreter between two cultures.
We also operate locally in Northern Finland, and therefore we have particularly good knowledge of the region’s market, local actors and culture. In the past, we have also acted as an advisor to other wood processing companies, so our good knowledge of the industry and strong regional knowledge provided a solid foundation for this acquisition as well.
How did you overcome the challenges that this transaction presented?
The main challenges were related to understanding different cultures, and it was there that our experience helped to move the process forward to a successful outcome for all the parties. In the negotiations, we helped the parties to bring into the open what was important to each party. It is essential to understand why something is important to one of the parties, because not everything is always said out loud in negotiations and there can be a lot of things in the background that the parties are unable to put into words.
Problems, disagreements and challenges cannot be avoided in negotiations. We were led forward from these by a solution-oriented approach and a genuine desire to find an end result that satisfied everyone. Throughout the entire process, there were also regular discussions about the details and challenges that had to be solved – both among top-level decision makers and among the project team concerning practical measures. Regular and open discussion on every level helped the project to proceed according to plan at all times.
Legal expertise and mastery of practical matters are important when completing business restructuring, but the best outcome is achieved when the motives and wishes of the parties are understood more deeply and the best possible negotiation result is found for everyone based on this. Here, the successful outcome was supported by our extensive experience in various negotiations and business restructuring processes as well as a broader understanding of the local market, industry and culture.
What impact do you expect the merger will have on both firms and on the wider wood processing market in Europe?
For the buyer, Lexia’s client Pfeifer, the acquisition was a significant strategic step. Even before it happened, the company was already a significant player in the wood industry on an international scale. The acquisition clearly strengthens their position even more, as the company took a strong position in the Northern European wood market. Regionally, this was a new territorial conquest for Pfeifer; the company’s position as a global operator is strengthened and its production capacity increases. With the acquisition, Pfeifer will now be one of the largest wood processing companies in the world.
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For Pölkky too, the transaction was a significant step and part of deliberate development work. With the merger, the company’s efficiency will improve and more jobs will be created in the region. Pölkky has already been one of the largest employers in the region. With the merger, the company is now becoming an even more important regional actor, for example from the point of view of employment.
Do you foresee Lexia working on similar deals in 2023?
I believe there will be changes in the sawmill industry even in the future; the industry is going in a more uncertain direction. There will be turmoil, and mergers of a similar type will probably take place in the near future as well. Lexia’s strong expertise in the industry and in carrying out large-scale business restructuring is strong, so it is natural that we will be involved in similar processes in the future as well. I estimate that, in 2023, we will see at least one acquisition of the same type, and maybe even a couple.
Do you have any further comments to make about the acquisition?
Lexia’s way of working locally in Northern Finland and its strong knowledge of the regional actors and culture as well as its versatile expertise in corporate law created an excellent basis for carrying out this type of business acquisition. In business arrangements of this scale, it is exceptional that a legal partner can support the client in such a comprehensive way. For the client, this brings ease and peace of mind in the middle of an enormous process.
