Donnelley/CGX Deal Changes Landscape –Michelson

News of the definitive agreement on Oct. 24 whereby RR Donnelley (RRD) will acquire Consolidated Graphics (CGX) for more than $620 million rocked the commercial printing world. With a network of 70 printing plants—in 26 states, as well as in Toronto, Prague and Gero, Japan—generating more than $1 billion in annual sales, CGX had been the model for successful rollups in the highly fragmented commercial printing marketplace. For CGX, the transaction provides an exit route for its 70-year-old chairman and CEO, Joe Davis. And, for RRD, Consolidated Graphics’ network of facilities in or near every major U.S. population center adds local sales and service touchpoints for Donnelley’s commercial printing group.

Assuming the deal, which is expected to close in Q1 of 2014, passes antitrust and CGX shareholder approval, its ramifications will cause shock waves—both positive and negative—throughout the industry. Will it be good news for privately held, independent operations that competed with CGX on local and regional levels to capture accounts that don’t want to do business with a Goliath like RRD? Yes. Will it lead to further industry consolidation among independent, privately held commercial print shops that won’t be able to compete with Donnelley’s marketing acumen, cross-selling smorgasbord and the pricing power that comes with a $10+ billion conglomerate? Yes.

So, perhaps this mega-deal will prove to either be a blessing, or a curse, depending on the local/regional landscape of customers and prospects where your print shop is located. One thing’s for sure, though: You can expect a shake-up within the 70 facilities and among the more than 5,000 employees that comprise Consolidated Graphics, as well as within Donnelley’s existing commercial printing footprint.

According to a Crain’s Chicago Business article published last August, since April 2007, RR Donnelley has shuttered 27 facilities and eliminated more than 14,000 workers (a number that’s since grown). One could argue that RRD CEO Thomas Quinlan is just doing his job—removing production capacity in line with weakened market demand for print-related products and services. That doesn’t make it an easier pill to swallow, however, for those communities and people impacted.

Either way, though, 2014 will surely be a topsy-turvy year for the CGX network, as well as for commercial print shops that compete against it.

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