Northern Pulp (Abridged)

Blue Wolf Capital Partners, a private equity fund specializing in distressed firms, considered acquiring the Pictou Mill in Nova Scotia in 2008. Facing numerous challenges, Blue Wolf's decision rested on several critical questions. Firstly, they needed to evaluate the macroeconomic risks associated with the highly cyclical pulp market and determine sensitivity impacts on revenues and risk mitigation strategies. Secondly, they had to establish the fundamental value of the plant, identifying significant uncertainties and risks such as environmental and political issues due to dependencies on aging effluent pipes and unresolved disputes with the Pictou Landing First Nations community about pollution management.

Additionally, Blue Wolf had to assess labor concerns, including an underfunded pension plan, outdated work rules, and an overstaffed workforce with ongoing union tensions. Operationally, the broken supply chain—complicated by the lumber industry's recession—required addressing the transition from waste chip purchases to the more costly whole tree chip production. The investment team also had to judge the realism of their performance improvement plans and consider Neenah Paper's value and alternatives for selling the mill. Finally, determining an appropriate offer price encapsulated all these factors to ensure a balanced, comprehensive acquisition strategy.