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Colville Helps CGX Compete On M&A Circuit --Cagle

April 2002
April can mean only one thing...spring is here. And the fancy of young men everywhere is captivated. It's a giddy excitement expressed as a certain fragrance, a knowing glance, obvious body signals and curves that leave your jaws hanging open. You wonder if you could make it to first base, given the opportunity.

After all, you have all the right moves down; you know what the other person is thinking. You're good with your hands and quick on your feet. You've played this game before and know a thing or two about how it's done. There's no way you can lose.

Love is in the air.

There's only one thing I'm talking about, baby!

That's right; it's baseball season.

True Love

The smell of popcorn, hot dogs, stogies and watered-down $5 Solo cups of beer fill the air. The pitcher peers in at his catcher, shakes off a sign, wheels and deals. The batter, having adjusted everything on his person (except the attitude) takes a mighty swing and that familiar crack rings through the bleachers. It's a rite of spring, and a time of year when optimism is everywhere.

As the calendar year turned to March, one of the leading commercial printers in the consolidation business acquired a proven performer to strengthen its upper management team for the upcoming season and beyond. Chris Colville doesn't swing a bat; he's probably more comfortable using a pen and legal pad. But as was the case when the New York Yankees signed first baseman Jason Giambi, Consolidated Graphics (CGX) brought Colville back to the fold, expecting him to post some big numbers.

Here's a pair that would look sweet on the back of any trading card: 50 and 500. The first is the number of transactions he completed during his initial six-year term with CGX from 1994 to 2000. The second is the combined annual revenues, in millions, of the acquired companies, the equivalent of two Alex Rodriguez salaries.

The lure of Colville returning home to his Houston roots and his old professional stomping ground couldn't be ignored.

"I left on good terms with the company and with Mr. (Joe) Davis, and I stayed close to the industry while I was in California," Colville says of leaving CGX in the fall of 2000 to join Murphy Noell Capital. "I'd been having conversations with Joe that led to further conversations. (CGX) felt they had a need for someone to round out their management team with M&A skill sets."

A former first-round pick out of Texas Tech, the return of Colville (OK, no more sports references) creates a buzz of excitement in the industry and, undoubtably, in the CGX war room. Frankly, consolidation within the commercial printing industry has been relegated to mostly small deals—companies pulling together to better weather the economic storm.

The big boys of consolidation haven't been so big in the last 12 to 18 months. It isn't all their fault, but the recession can't be used as a crutch. A lot of valuation multiples and dotcom lessons were learned from the heady days of 1998 and 1999, and some of those wounds have yet to heal. The capital venturists have moved down the line and the investment bankers now have more brains than money.

Mañana Man

As M&A specialist Harris DeWese has more eloquently put it, it's not the consolidation model that's flawed; rather it's the people making the key decisions who are. DeWese helped us put together a Top 10 list of industry leadership candidates (Colville, of course, was on there) for our regular February issue and his lone regret is that we could not run a flipside list, a Bottom 10. It would have been amusing, only to help further illustrate how often good managerial qualities are overlooked in the graphic arts industry.

"I honestly felt, at some point, Chris would return to the printing industry and eventually be the president of some company," DeWese says. "Chris is a deal-maker—intelligent and methodical. He knows M&A about as well as anybody I know."

Colville was a natural choice for CGX to strengthen its senior management team, DeWese adds. The statement CGX makes with the move is obvious—the M&A climate is becoming favorable. Like the aforementioned sport, M&A is a game not everyone can play well enough to make a living.

"It depends on who has the strong balance sheets," Colville explains. "There aren't too many companies that have them. Consolidated Graphics is one, Moore is another. The companies that have good balance sheets now are fewer than the amount when I left Consolidated Graphics (in 2000).

"The recession has taken a lot of steam out of acquisition multiples," Colville adds. "There will be a lot more M&A activity in the near future, but it will be concentrated among a smaller group of companies."

Optimism is truly everywhere.

By Erik Cagle
 

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