Industry Consolidation — A Quiet Buyer’s Market

James Cohen, executive vice president of mergers and acquisitions for  Consolidated Graphics.

Bob Cronin, managing partner of The Open Approach.

Roy Grossman, founder of MSP.

Roy Grossman, founder of MSP in New Canaan, CT, has re-entered the fray as an industry consolidator, expressly seeking digital printing companies primarily in the $7 million to $12 million annual sales range. It is a partnership model, with MSP seeking an 80 percent stake and the digital shop’s owner holding 20 percent.

“Our goal is to show an entrepreneur that, if we do our job right, their 20 percent stake will be a sizable second payday four or five years down the road,” asserts Grossman, a former Sandy Alexander senior executive.

“In the digital printing environment, there’s a ton of very successful entrepreneurs who use their own capital to build businesses. Now, they face two issues: One, access to capital is limited, so they’re having trouble growing the company. [Next], very often they don’t have the skill set or the inclination to bring the business to the next level. That’s where you need a partner,” he contends.

Grossman’s objective is to help guide these companies to the $25 million range, backed by MSP’s private resources and the think tank talent provided by fellow industry veterans Chip Stine and Jon Fogel. Not being at the mercy of third-party financiers is no small consideration, as those attempting to obtain conventional financing soon realize.

Offset printers that don’t enjoy a specialty niche, or at least dabble in the digital environment, stand to find the M&A landscape difficult to maneuver, according to Grossman. With heavy iron—particularly, web presses older than five years—often worth less than their payoff, it creates stress on the printer’s balance sheet. That can make closing a deal difficult.

“For many general commercial printers, these sellers need to realize they’ll have to hold paper to get a deal done,” he adds. “They’ll have to give the buyer a note, in most instances. So seller financing is going to become an important part of any deal, because of the credit market. Secondly, most of these companies will end up having a significant part of the consideration being a payout, an earnout.”

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