Industry M&A Activity : Deals Are in Full Bloom
The calendar tells us that it is May, a time of renewal and blossoming. Spring always offers optimism, a reminder that what has been cold and hidden for too long can now be basked in warmth and resplendent in full flower.
That optimism carries over to the economy, the great X factor in the printing industry. A more favorable economy means greater marketing budget spend for clients and greater availability of low-hanging fruit for printers. And, from a mergers and acquisitions (M&A) standpoint, there are many ramifications.
For those printers in some level of distress, who may or may not be experiencing an uptick in orders, this may be an opportune time to cash out as opposed to doubling down in an industry that seems to be banking more on digital than offset presses, even though digital printing still represents a tiny fraction of the total number of printed pages. Granted, the initial financial outlay for digital gear may be less than for traditional iron, but can shorter (and more frequent) runs and smaller margins sustain a traditional offset shop? It may be better to join an organization that can complement your own through expanded offerings, with the aggregated firm better serving the client lists of each company.
Some may see the economic atmosphere as an encouraging sign to follow through on long-delayed capex improvements. Not everyone shares that view; to some, a down economy is an ideal time to add gear and get a better jump on those competitors who remained in a holding pattern. Likewise, those printers who curled up in a ball during the Great Recession may have already done irreparable harm with their inaction.
And, in instances where the equipment is too old, the facility’s lease is up, the firm is fully leveraged and unprofitable, the last bastion of value lies in the client roster. But that’s going on the assumption that valuable customers have not already been lost. What remains—a quasi-decent customer list, perhaps a somewhat talented salesperson, maybe some folding equipment of value—translates into the ever-popular and growing trend toward asset sales.