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Consolidation--The Ties That Bind?

February 1999
Consolidators, independents discuss merits of selling the business to a roll-up company.


BY ERIK CAGLE


To sell or not to sell? A difficult question with no easy, or clear-cut, answers.

The last 15 years have been marked by considerable growth in the commercial printing industry. That growth has been bolstered by awe-inspiring advances in technology: computer-to-plate, offset press automation and digital prepress advances, which have all streamlined production processes and decreased turnaround time.

By building a better mousetrap, printers large and small have made their industry highly competitive. While the National Association of Printers and Lithographers projects industry growth in the 4 percent range for 1999, it is the larger, national printers that are accounting for a larger slice of the growth pie.

Not surprisingly, the printing industry is following a familiar path taken by other industries—the road to consolidation. Mobil and Exxon, America Online and Netscape, British Petroleum (BP) and Amoco, Chrysler and Daimler-Benz, and Citicorp and Traveler's—heavy hitters in their respective industries—are all banking on reaping the benefits of consolidation.

The concept of the small, mom-and-pop business owner unwantingly releasing control of his/her company to a cold, corporate entity is as outdated as it is inaccurate. No one is selling the "farm" to avoid foreclosure anymore, especially not businesses that generate $10 million or more in annual sales—the magic number for ideal acquisition candidates by most industry consolidators.

What consequences face the printing industry in light of consolidations? Will an entire segment of smaller to midsized printers be swallowed into a much larger machine? And will the landscape of commercial printing, its price structure and the manner in which business is conducted, be forever changed?

Respected industry veteran Ray Frick has worked on both sides of the issue. Frick is currently CEO, president, director and part-owner of Lehigh Press, a highly successful, independent printer celebrating its 75th anniversary this year. But for the previous four years, he was president and COO at Quebecor, where he helped lead the charge in acquiring Eagle, Sayres, Petty and American Signature.

Frick earlier served as president of the direct marketing group at Banta when the company acquired Danbury Printing. Prior to that, he toiled for R.R. Donnelley's book group. He began his career at DuPont, where he orchestrated the supply end of the graphic arts distribution program.

"There's no question that the trend toward consolidation in the graphic communications industry is rampant and will continue," Frick notes. "It's too linear to say that the consolidation trend will spell the end for midsize and small providers. I don't think that will be the case.
 

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