Jensen: Two factors have drastically reduced acquisition activity. First, public company valuations, although recovering, are still lower than what is needed to stimulate significant acquisition activity. Second, the debt markets are severely restricted in the current economic environment. This pertains to both cost and availability. This is true even for quality companies with strong financial ratios.

Reilly: The major driver and the major reason it has come down is because the multiples of cash flow that public companies and consolidators have been trading at have come down significantly. For them, the consolidators, to be providing their shareholders with returns, they need to be purchasing companies below that. Few printers want to be purchased at those levels.

Davis: Starting in the fall of 1999, the printing business lightened up from a sales and profitability standpoint. Because of that, stocks of many printing companies, including our own, suffered. Wall Street is not as enamored with printing companies as it once was.

However, prices for individual, private printing companies have gone up pretty high. As those prices for private companies are coming down, and I believe they are coming down today, we will see more acquisition activity than we have seen over the past 18 months.

PI: When can we expect to see M&A activity pick up again and what will give it a kick-start?

Norton: I believe that consolidation activity will pick up when there is an improvement in some of the issues I set forth earlier.

Jensen: Although a few cash-rich companies may initiate some level of acquisition activity, we believe it will be the end of the third quarter, at the earliest, before we see some normalcy in the markets. We do not, however, believe we will see a return to 1999 levels for quite some time, if at all.

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