PIA/GATF Summit Looks at Industry M&As

One of the more popular sessions of the conference was the presentation by Joe R. Davis, chairman of Consolidated Graphics, on mergers and acquisitions. His firm has acquired 23 plants in 18 markets since going public in June of 1994.

After reviewing the five corporate consolidation periods in U.S. history, Davis surmised that M&A activity of the 1990s has been similar to that of the first consolidation trend of a century earlier. It shares the characteristics of a common industry, enhanced purchasing power and greater market share.

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.

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