Compass Report–The State of M&A

There are far fewer active buyers (consolidators) for private companies. Where 1998 was a sellers’ market, 1999 evolved into a buyers’ market. Some of the consolidators have integration indigestion. Others have taken to their beds with severe pain. One or two may not survive.

Wall Street, enamored with dotcoms and tech stocks, has turned its back on the printing industry.

The printing industry is not telling a good story. The excuses for some failed quarterly earnings reports sound like the student whose dog ate his paper and the teacher knows the student doesn’t have a dog.

On the other hand, most segments of the printing industry are growing faster than the GDP and the Internet is generating new print sales.

The window of opportunity for sellers in the printing industry closed some in 1999. Once wide open in 1997, it began to descend slowly in 1998 and has been stuck partly open since January 2000.

Deals in 2000 will be fewer and harder to complete due to buyers’ pre-occupation with existing operations. More mega-deals will occur late in the year. Smaller, private companies will continue to throw their hats into the consolidation ring.

Eventually, the compelling economics of industry consolidation will prevail and people will figure out how to capitalize on the economies of scale; manage professionally what they acquire; and consolidate the industry in a more orderly fashion.

E-commerce printing Websites will shake out and perhaps themselves consolidate; and a smart few will “learn” what can be sold on the Internet profitably and what cannot. Meanwhile, most traditional printing companies will continue to survive and prosper.

The printing industry will soon learn how to tell its story and stake out a more respected position in American business and industry.

Finally, we encourage analysts and observers to stop generalizing about the printing industry and to focus on the microeconomics and behaviors of the various printing segments.

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