Steenburgh/Williams on M&A Directions: ‘We’re Not for Sale!’ Are They?

According to data from Printing Industries of America, the U.S. commercial printing industry now consists of about 45,000 firms. That’s not as many as there used to be, but the number still represents a rich field of opportunity for those who want to acquire or invest in printing and packaging businesses.

If you are in the market to acquire, chances are excellent right now that the type of company you want exists and is in play. Even with the maturing and consolidation of the industry, the base remains remarkably diversified in terms of process, product and sales volume. As we and our other New Direction Partners colleagues have been reporting recently, M&A activity around these companies is finally back to its pre-recession level—a strong signal to buyers that the time to act is now.

The trick, however, is finding and making the match you’re seeking in this crowded business bazaar. Where would you begin, and how would you refine the search? With a company of your own to run, where would you find the time, even if you’d found the prospect? The good news is that no matter how specific your requirements are, the match can be made for you by M&A professionals who understand precisely the kind of deal you have in mind.

Seeking a Shop with Certain Criteria

We’re thinking of one particular transaction in which the buyer, referred to us by a third party, couldn’t have been clearer about the capabilities and the location of the firm he expected us to find. The buyer was an entrepreneur who had taken a conventional commercial printing business and transformed it into a successful Web-to-print company similar to the Vistaprint model. Located in a mid-Atlantic state, it shipped nationally but needed an extra day to get orders to the West Coast.

The owner decided that what he needed for overnight delivery to the West Coast market was a production facility in a specific Western city. But not just any plant in the area would do—it also had to have six-color, 40˝ offset equipment identical in make and model to the presses in the existing East Coast location. That gave us our marching orders and, eventually, we identified a firm in the specified geographic location with all of the characteristics our client wanted.

“We’re not for sale!” is what we heard when we first approached the owners, a husband and wife who had been operating the company for many years. But, we could see from the outset that the business needed a change of course. The owners had no family members as successors, and there was no exit strategy in place. We also saw issues with the sales force and with customer concentration.

This prompted us to make a case that selling the company was the solution to underlying problems that might turn into serious threats if nothing was done about them. We needed to convince the owners that our client’s offer, when it came, would be a savior for them and a win for everyone concerned.

They didn’t change their minds overnight. In fact, it took them nearly a year of close consultation with us to reach a point where they were willing to entertain offers. A personal visit to the potential seller’s plant accompanied by our client clinched the deal, which we were able to structure as a combination of cash at closing, a commitment by the buyer to rent the building and an agreement to retain the owners in consulting roles.

Why the initial reluctance on the sellers’ part? At the time this story unfolded, the industry was still stuck in recession, and the owners—like the principals of many other closely held printing companies then and even now—believed that if they just held on a bit longer, things would return to status quo ante. It was hard to convince them of the wisdom of the advice we offer to all sellers: don’t wait until the train has left the station before you start planning the trip.

Prospective buyers should bear in mind that even though some printing companies might not appear to be on the market, they still could be prime candidates for acquisition. The only trouble is, their owners don’t yet realize it. The firms may be stable, and they may still be producing nice incomes for their principals. But, when they are examined more closely, shortcomings emerge.

It may be years since the owners made any significant capital investments in them. As a result, they may not have the wherewithal to purchase the technology they would need to sustain their businesses going forward. Firms like these could have attractive assets such as plant, equipment and a solid customer base, but no real means of leveraging them for future growth.

It is the task of the professional M&A adviser to put these owners in the frame of mind they need to be in: that of the seller. Once they have come to understand that the industry’s glory days won’t return and that they can’t go on clipping coupons indefinitely, the adviser can show them how to position themselves for profitable acquisitions by buyers with whom they make a natural fit.

The good news in all of this for buyers is that the kind of printing or packaging company you want to acquire really is out there, even if you’re not 100 percent convinced that it is. Let an M&A professional guide you to it—it may even be nearer at hand than you think.

By the way, although the transaction noted in this column closed three years ago, the story isn’t over yet. Our client came back to us recently with specifications for the next company he intends to acquire. We’re on it. PI

About the Authors
Frank Steenburgh and Thomas Williams are partners in New Direction Partners (NDP), the leading provider of advisory services for printing and packaging firms seeking growth and opportunity through mergers and acquisitions. NDP assists its clients by giving them expert guidance and peace of mind at every stage of the process of buying or selling a printing or packaging company. Services include representing selling shareholders; acquisition searches; valuation; capital formation and financing; and strategic planning. NDP’s partners have participated in more than 300 mergers and acquisitions since 1979. Collectively they possess over 200 years of industry experience with transactions in aggregate exceeding $2 billion. For information, email info@newdirectionpartners.com