Try Googling “quotes about pride,” and you’ll be treated to literally thousands of them—it's amazing to see how many angles there can be to a basic human trait that we all share. But, the English writer John Ruskin may have put it best in the sense that sometimes applies to mergers and acquisitions in the printing industry. “In general,” Ruskin tells us, “pride is at the bottom of all great mistakes.”
If a printer can make a greater mistake than shutting down the business instead of keeping it going through a sale structured as a tuck-in, I personally don’t know what it is. A shutdown is exactly that: a permanent cessation of production, employment, and customer support. A tuck-in, on the other hand, keeps presses rolling, preserves at least some if not all jobs, and doesn’t leave loyal accounts in the lurch. Less altruistically, the tuck-in seller gets a better payout with royalties earned over time than the seller who just closes his doors and tries to collect what he can in a one-time liquidation of plant and equipment.
Why then do some printers who could do tuck-ins prefer to take the dead-end route? Usually, it’s because selling to a competitor is regarded as an admission of failure—an outcome that the owner doesn’t want to see as the culmination of years of effort spent in building the business. But, if fear of failure is what’s driving the decision, shouldn’t the fear of failing to rescue a salvageable enterprise in a tuck-in be even stronger? It would be, if the “sin of pride” weren’t getting in the way of forming a sensible exit strategy.
In closely held printing businesses, pride can be a family affair as the various shareholders confront the fact that the only way to perpetuate the company is to let another company absorb its customer accounts and other assets in a tuck-in. Second- and third-generation owners naturally feel the weight of the past upon them in making the choice. In all cases, it’s probably the most stressful and emotionally fraught business decision a seller will have to face.
Unfortunately, abundant time for decision-making isn’t a luxury that most tuck-in candidates enjoy. When sellers dither, buyers lose interest and walk away. And, don’t forget the influence of third parties. In one transaction that New Direction Partners recently tried to structure, the seller was leaning toward a tuck-in but couldn’t get quite over the “shame” of doing the deal with a rival. While he was grappling with this, his bank foreclosed on some outstanding loans, effectively forcing the shutdown we had hoped to help the company avoid. With quicker resolve on the seller’s part, the story wouldn’t have had to end as it did.
There are plenty of good things to say about pride. After all, it’s one of the noble impulses that gets us out of bed in the morning and motivates us to do the best job we can for our customers, employees, and others who depend on us. But when it makes anyone resist the idea that today, every print company owner should be preparing either to acquire or to be acquired, it becomes something else. Steer clear of the trap it can set for your business when your moment of truth arrives.About New Direction Partners
New Direction Partners (NDP) is the print and graphic communications industry’s leading provider of advisory services for 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 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.
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