New Study Looks At Printing's Merger Mania
What types of structural changes? Well, in the printing industry, companies must deal with a trend that Scharfstein calls "asset utilization."
"Printers are facing changing technologies," he explains. "They need to invest in new equipment and technology that is very expensive—and very productive."
Indeed, there's more to printing nowadays than ink on paper. And the complementary services and state-of-the-art capabilities that buyers demand can easily erode a printer's financial foundation.
Those who choose not to invest in new equipment run the risk of falling behind both technologically and economically. Owners of these companies can look at mergers as a means of survival without the risk of costly investments. Once bought by larger companies, they receive the capital needed to stay in business.
Printing companies that can afford the latest technology have troubles of their own. Once they install new equipment, they must contend with downtime.
"One of the challenges you have if you invest in new equipment is that you must keep that equipment busy," Scharfstein notes. "Sometimes that's difficult to do because a piece of equipment can double your capacity overnight."
Acquisitions can absorb that capacity. New companies provide new sales; new sales provide work to keep equipment running. That's one reason why printers buy other operations.
Not that printing companies are the only buyers in the marketplace. Scharfstein notes that outside sources also see printing as a lucrative industry worthy of investment.
"People are looking at this industry as having niches that can be profitable," he says.
By Jerry Janda