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November 1998

One of the first managers Cunningham selected was Mays. Back in the '80s, Mays competed with Cunningham for different accounts. That all changed when Cunningham became a manufacturer. Mays, who admired Cunningham's move, got to make the move himself when Cunningham invited him to become a partner in the new company.

Another key player is COO Robert Needle, a former client. "Robert realized we were the best at what we did," Cunningham says, "and he wanted to join a winning team. We also realized that he was the best at what he did."

Rounding out the Cunningham management team is CFO Robert Okin, the latest addition. Okin came on board shortly after Cunningham Graphics' IPO in April.

A third generation printer with 25 years of experience, Okin is an expert in the area of M&As—and gaining capital for acquisitions was a driving force behind the IPO.

"As a private company, we couldn't afford Bob Okin and his expertise," Cunningham admits. "But when he decided to take the company public, we decided that we couldn't afford not to have him."

As Okin's hiring proves, Cunningham Graphics' publicly held status provides a powerful perk for drawing top talent. Specifically, the company can now lure potential staff with stock options.

New employees aren't the only people benefiting from Cunningham Graphics' IPO. Employees hired on or before Dec. 31, 1997, received a certain amount of stock options for every year with the company. This has made a difference.

"The day we went public, you could feel the energy in the company," Cunningham recalls. "Everybody was walking around a little bit faster. They were turning out the lights when leaving different departments. They were producing work much more efficiently."

Cunningham opened its stock at $13 per share. It never saw $13. When trading began, the share price immediately jumped to $18. Stock peaked at $21 per share and, at press time, was trading at $14.

Cunningham, who notes that his company is not immune to overall market conditions, is upbeat about the stock performance. "On a percentage basis, if you look at all the IPOs that were done in April, we're probably at the top of the heap for keeping our value," he says.

Cunningham began making his plans for the IPO two years ago, following the lead of other industry consolidators. "We owe a lot to Joe Davis at Consolidated Graphics and to [Gerald] Mahoney at Mail-Well," he says. "We saw what they were doing, and it looked very promising. We thought we could do it a little different. We wanted to build the company through organic growth as well as acquisition growth, which would be specialized growth. We wanted to go after niche players and companies that complement what we do, not just general commercial printers."

A British Buyout

The first company Cunningham Graphics went after was Roda Ltd., a London-based financial printer. Cunningham Graphics bought out Roda for $8 million six days after the IPO's completion.

Cunningham Graphics and Roda shared a partnership long before the acquisition, however. The two companies—along with Workable, a Hong Kong financial printer—were all part of World Research Link, a business network that Cunningham Graphics developed five years ago to strengthen its position in the research report market.

By establishing the World Research Link, Cunningham Graphics was able to compete against larger, global printers. ISDN and T-1 lines tied Cunningham Graphics, Roda and Workable together. The three partners also standardized their service and equipment so all clients received the same treatment.

"We calibrated our software and our output devices, so that we were truly handling files the same way," Cunningham says. "Even the way we handled the customers—the way we answered the phone, the way we billed—was done the same way. We acted as one company."

Roda won't be Cunningham Graphics' last acquisition. Even so, it's questionable Workable will be the next. While Cunningham speaks highly of the Hong Kong company, the Asian economy makes the Far East a risky place to invest now. "It's a shaky market," Cunningham notes, "but we're looking forward to the day when we can add Workable to the team."

Asia may be closed right now, but many other markets are wide open. "We're looking at acquisitions both domestically and overseas," Okin says. "We want companies that complement what we're doing and also give us some diversification."

According to Okin, Cunningham Graphics' acquisition strategy consists of three parts. The first is purchasing standalone operations, such as Roda. The second part covers what Cunningham calls "tuck-in" acquisitions; these are acquisitions where Cunningham Graphics absorbs—or tucks in—companies into its existing facilities.

In Manhattan, where realtors are forcing out manufacturers, tuck-in acquisitions are booming for Cunningham Graphics. With nowhere else to turn, printing companies that lose their leases can liquidate their assets by selling equipment to Cunningham.

The final part of the acquisition strategy is taking over in-plant printing operations. By buying out corporate in-plants, Cunningham Graphics strengthens relationships with clients, generates additional revenues, adds more equipment and gains new talent.

"Many of these shops have good employees, but in some respects they are limited because they work within a graphic arts department at an investment banking firm, for example," Cunningham says.

When Cunningham Graphics shuts down an in-plant, it gives the in-plant's employees an opportunity to grow. "We're making job offers to 85 percent of the employees," Needle says, "and approximately 65 to 80 percent will accept."

The latest employees to accept this offer came from in-plants at McGraw-Hill and Schroder & Co., a New York financial company. Money raised through the IPO made these in-plant buyouts possible. The IPO also allowed Cunningham to upgrade Roda's technology. In the states, Cunningham Graphics invested in two large-format Purup-Eskofot imagesetters, two Mitsubishi Imaging direct-to-plate machines and an automated Wohlen- berg perfect binder, and added a second six-color Heidelberg press.

Thanks to the IPO, Cunningham Graphics now operates 20 presses in London and 30 presses in the United States—ranging from one-color sheetfed offset presses to non-heatset web presses. Still, the IPO has given the company more than new equipment, more than new facilities. The public offering has given the printer a fresh outlook.

By becoming a publicly held company, Cunningham and his staff got to see their organization through an investor's point of view. And, as things turned out, they were accustomed to the sight.

Investors expect Cunningham Graphics to maintain predictable and sustainable earnings, and the company has a history of matching its business plans to the penny. That's because Cunningham Graphics has always done its best to demonstrate its financial health to customers. The customers, in turn, have helped the company remain strong.

"Eighty percent of our billing is contractual," Mays says. "That's a positive thing. We're somewhat immune to the transactional up and downs of the print market."

Good thing, too. When you're a publicly held company, you never want to go down.

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