Mergers and Acquisitions : M&A’s Class StruggleMay 2010 By Erik Cagle
TAKE A look at the news pages of Printing Impressions, particularly during the first quarter of 2010, and you will be confronted with a skewed reality of the merger and acquisition (M&A) market. The deals are breath- taking in scope:
• Sussex, WI-based Quad/Graphics annexes Worldcolor (nee Quebecor World) of Montreal at a price that should shake out to roughly $1.4 billion.
• Chicago giant RR Donnelley spends nearly $500 million to acquire storied financial printer Bowne & Co. of New York.
• IWCO Direct, Chanhassen, MN, orchestrates a move to obtain the U.S. operations of Transcontinental Direct. The latter boasts sales volume in excess of $120 million annually.
• Houston-based Nationwide Graphics purchases the assets of its former ward, Premier Graphics.
There have been other deals of lesser magnitude, yet nonetheless substantial. Consolidated Graphics (CGX) and its subsidiary, AGS Custom Graphics, acquired Modern International Graphics and Modern Logistics. Most recently, IntegraColor, of Mesquite, TX, picked up Dallas-based The Color Place.
Amazingly, most of these deals were announced within the first two months of 2010. Any one of these transactions could be the highlight of an entire year, and bring to mind the rash of deals that shaped the last significant M&A era of 1998-2000.
Are More Deals Ahead?
But two questions persist as we view the present state of merger and acquisition activity. Are these deals representative of the current transactional climate? And can we expect to see more of the same as 2010 marches on? Judging by the reaction of some veteran observers, the answers, respectively, are "no" and "maybe."
"The two mega-deals (Quad/Worldcolor, RR Donnelley/Bowne) do not herald a renewed spate of M&A activity in the printing industry," notes Harris DeWese, chairman of Compass Capital Partners and a leading transactional consultant. "They were deals that enabled the buyer to gain much greater market share in the segments they serve—financial in the case of Donnelley buying Bowne, and long-run publications and catalogs for Quad in the Worldcolor deal.
"Both of these deals were accomplished at bargain values, so the investments were modest for mega firepower...It also would not surprise me to see either Quad or Donnelley make a run at Brown Printing if they can get it past Hart-Scott-Rodino."
James Cohen, executive vice president of mergers and acquisitions for CGX, says that while the big deals didn't illustrate any industry trends per se, he does feel these moves indicate some bullish attitudes toward the future.