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What’s Fueling M&A Fever?

April 2007 By Bob Cronin
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OUR INDUSTRY is experiencing some of the most exciting and significant changes it’s seen in decades. We’ve witnessed RR Donnelley’s brigade of acquisitions. We’ve observed Consolidated Graphics’ steady stream of buyouts and all-time-high stock prices. We’ve watched Cenveo’s hostile takeover attempt of Banta get usurped at an unmatchable premium.

Seemingly, not a week goes by that you don’t hear about another big-dollar acquisition, mega-merger or stock deal. And, the activity isn’t just from the majors; graphic arts firms of all sizes are pursuing this new avenue for growth, fueling the interest and investment of the private equity community. The old view of print as a stodgy, capex-intensive venue is no longer true. We’re not looking at the print rollup model of the past, but at strategic positioning through acquisition by public and private investors to produce more attractive returns. Today’s printing industry is rife with opportunity and financial reward.

Of all the transactions at play, perhaps the most notable are those driven by private equity investors. Unlike venture capitalists, which loan money at high rates, and more or less take over a business, private equity investors have a “partnership” mind-set.

They offer growth capital and strategic support that enable high-potential companies to realize their maximum value more quickly. They do not take an active role in day-to-day operations; they function as an “enabler” that shares in a company’s growth—and holds a stake in its future. Private equity offers graphic arts companies a new growth path they cannot achieve on their own, with greater flexibility for ownership exit, succession and long-term viability.

While their interest is relatively new, private equity groups are finding our industry an attractive value proposition. Strong-performing printing companies are cash-positive with wise management teams who position themselves for multiple opportunities. Private equity groups seek out firms that can make the most of these—and deliver their target rate of return.

Consider this activity from private equity investors:

• Genstar Capital buys Fort Dearborn.

• Wind Point Partners buys York Label, Industrial Label, Quality Assured, and others.

• Wellspring Capital buys D.B. Hess and The Press of Ohio.

• Huron Capital sells Printegra and National Imprint to Cenveo.

• Bears Stearns buys Hilltop Press.

Each of these transactions has brought tremendous new opportunity for company growth. Since our firm, The Open Approach, has been closely involved in a number of these transactions, I can assure you the results have been quite favorable for all parties.
 

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