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PIA/GATF Summit Looks at Industry M&As

January 1998

According to Davis, consolidating offers four advantages: economies of scale, access to advanced technology, financial stability and lower equipment costs.

Part of the economies of scale is negotiating insurance rates across a much larger base. Also, economies of scale allow a plant to concentrate on operations and sales for further growth and profitability. Management doesn't have to spend time and energy meeting with lawyers, bankers and accountants.

Davis illustrated lower equipment costs by citing Consolidated's recent agreement with Komori to buy $50 million worth of presses over five years at both favorable terms (implied discount) and quicker delivery.

A printer panel, comprising executives from companies that have been growing by acquisition, followed Davis. One panel participant, Steve Gillispie, CEO of Cadmus Communications, said that his acquisition strategies have been "organized around competencies and markets." Cadmus specializes in the production of scientific/technical journals.

Steve Dyott, CEO of ACG Holdings (Sullivan Communications), said that his firm concentrates on the advertising insert market. His staff members have identified 100 regional printers serving this $4.9 billion market. They have prepared a detailed database on each of these companies as a potential acquisition candidate.

He went on to say that their analysis clearly shows that national insert players had lower profit margins than did the more-preferred regional specialists.

ACG has completed 15 acquisitions. During the past 18 months, four firms were brought into the fold, while eight were not. Gillispie thought that was a pretty good batting average.

Both Dyott and Gillispie were clear, as was Davis, that they want top management of the acquired firm to stay in place.

When asked how to get the most value for your operation as a seller, Gillispie responded, "Get debt down. Get earnings up with strong cash flow." He added that the seller should get advice from knowledgeable outside sources.

By C. Clinte Bolte


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