M&A REPORT -- New Era of Consolidation
* Moore Corp., Toronto, made a large splash when it acquired The Neilsen Co., a $90 million Cincinnati printer. This move came on the heels of a $100 million cost-savings initiative by CEO Robert Burton in 2001, in a campaign that has helped the company's stock rise from the $4 range to $13+.
The vast majority of deals, however, have involved smaller, competing firms that joined forces to enhance product and service capabilities. While these will certainly continue, there are indications that a number of much bigger deals are also on the horizon.
"We believe M&A activity will absolutely accelerate during the course of the year, but mostly in a strategic context," states Gregg Feinstein, partner with Berenson Minella, which offers investment banking services to the commercial printing industry. "The days of buying sheetfed printing companies as part of a 'roll-up' strategy preceding an IPO will not come back any time soon.
"What you will see are many of the traditional buyers coming back into the marketplace along with some new players, all buying assets that add something operationally to their businesses. They will be pursuing deals that accomplish a strategic objective for them and add scale to their operations. This could, for example, involve a product extension to assist in 'cross-selling' or a geographic fit, which fills a need in the markets they serve."
Feinstein believes larger transactions will transpire from the likes of Moore and Quebecor World. Berenson Minella acted as financial advisor in the Neilsen deal, which Feinstein feels added a commercial printing platform to Moore's other products.
"I would expect Moore to replicate the series of successful acquisitions that Bob (Burton) and members of his team pursued at World Color in the mid-1990s," Feinstein says.
Quebecor World, once it has completed the debt pay down/restructuring phase stemming from its 1999 merger, will be an active participant in the second half of 2002, he adds. Feinstein expects larger transactions by both companies.