Big, Bold, and Buyable

Printers adopt new production methods for one reason: to make money. It’s clear that printers see a bona fide moneymaker in wide-format output.

According to Printing Industries of America’s August 2016 economic Flash Report, almost half of printers now provide digital inkjet wide- or superwide-format services. Signage, the number one wide-format application, also heads the report’s top-10 list of “hot print markets” by sales growth over the 12 months prior to publication.

It’s therefore no surprise to see wide-format shops attracting their fair share of attention in the M&A marketplace. We’ve represented a number of them as sellers in transactions this year, and they make an interesting contrast with our commercial printing and packaging clients.

They’re relatively small — in the $3 million to $6 million range — but highly profitable. Their customers are retail stores, sports and entertainment venues, and other buyers of indoor and outdoor banners and signage. Some of them also have trade customers such as advertising agencies and commercial print firms.

They aren’t newcomers, having been in operation for 20 to 30 years. Their owners, now in early retirement age, see a professionally guided sale as the best way to make a profitable exit from the business.

Prospective buyers for companies like these include not only other wide-format shops but commercial printing businesses wanting to expand into the wide-format market. It’s definitely an attractive segment to think about entering: the market is stable and growing; profit margins are strong; and capital equipment costs are generally lower than what they are in the offset world.

Buyers unfamiliar with the territory should keep a few things in mind. Wide- and superwide-format devices are big-footprint machines that occupy a lot of square footage on the shop floor. Storing printed and unprinted substrates takes a commensurate amount of space. This may make it difficult to structure the purchase as a tuck-in that involves relocating equipment to the buyer’s premises — few commercial plants have that kind of room to spare.

Speaking of substrates, the ones used in wide-format production are very different from the materials that commercial shops are accustomed to working with. So are the inks. The learning curve also includes the hardware and fixturing that have to be supplied with display graphics after printing.

Some commercial printing businesses have mastered all of this and have built their own successful wide-format operations from the ground up. For others, though, the time it would take to the secure the equipment, hire the people, and develop the expertise only serves to delay entry into a potentially lucrative new market.

That makes growth by acquisition a smart strategy for owners of commercial firms who see opportunities in wide-format. The good news is that companies specializing in it are in play. Find them and explore the possibilities they offer with the help of a qualified M&A advisor.