Reflecting on Quad/Graphics, Worldcolor Deal

Since its founding, Quad/Graphics has quietly and artfully grown to annual revenues of more than $2.266 billion (PI 400 – 2009). Its growth in a disastrous recessionary 2008-2009 economy was an astounding 11%. Most printing companies experienced sales declines ranging from 15% to 40%. Much of the growth over its 40-year history was organic vs. growth by acquisition. Much of that growth was attributable to brilliant management, innovative marketing, superior salesmanship, work ethic know-how and technological genius.

Quad/Graphics, for example, was the creator of the highly successful “little red schoolhouse” near its Wisconsin plant where customers visited to learn about the latest graphic technology but, more importantly, to be partnered with key Quad associates who helped them better produce their magazines and catalogs. Print buyers valued their “degrees” from the schoolhouse and never forgot the source of their knowledge.

Now Quad/Graphics is growing by acquisition in a transaction to acquire Worldcolor for an estimated $1.5 billion that will result in Quad leaping to the number two position among printers in the world with revenues estimated at more than $5.0 billion.

Quad/Graphics is a private company, so its income statement and balance sheet are not available. My estimate, however, is the projected EBITDA for the new company in its first 12 months will be approximately $1.0 billion and its Enterprise Value at eight times, at a minimum, will be north of $8.0 billion. And, my crystal ball could be very conservative.

This deal is happening for all the right reasons—great management, great opportunities for cost saving, great marketing and manufacturing fits, and great value for the shareholders.

Many industry observers will scramble to have themselves heard with their conjecture about the impact of this deal on our industry. Forgetaboutit. There is no short-term impact except to possibly some smaller competitors and to RR Donnelley, which also occupies the publication and catalog markets served by Quad.

Harris DeWese is the author of "Now Get Out There and Sell Something." He is chairman/CEO at Compass Capital Partners and an author of the annual "Compass Report," the definitive source of info regarding printing industry M&A activity. DeWese has completed 100-plus printing company transactions and is viewed as the preeminent deal maker in the industry. He specializes in investment banking, M&A, sales, marketing and management services to printers.

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    There’s no question that Quad was led by a solely focused individual who was solely focused on helping his customers. He knew by providing quality service, excellent follow through and great pricing the customers would be drawn to him and stay with him!
    Another element also helped him build his company into one of the top companies (you see I didn’t call him a printer) was the fact that several vendors also believed in him and gave him very favorable terms if Harry bought their equipment. Of course, vendors frequently extended generous terms to customers and some of those deals turned out great and some ended up in the drain! But Harry, put those machines and systems into production, paid the vendors back, and the rest is history.
    He was a visionary in the printing business (now I am using that term), and learned that offering excellent service at excellent prices (at least for Quad) his business would thrive. The entire Quadracci family also deserves a big pat for helping Harry make it work.

  • http://RGWergew RG Wergew

    To understand Quad, remember Harry Quadracci was a lawyer. Google “Quad Graphics lawsuit” and you get over 100,000 hits. Google “Quadracci lawsuit”
    and you get over 22,000 hits. Read what Quad uses lawyers to do for their business.

    ALSO read about Harry’s mysterious death and the last couple of years of his life. He took to carrying a gun and he was clearly not happy in the world he had created.

    Roger Wergew

  • http://DrJoeWebb Dr Joe Webb

    The deal also helps in planning the Quadracci family financial future. By becoming a public company, any far flung family member who has stock can dispose or acquire shares on the open market, without incurring costs for independent appraisals and in-family negotiation and various tax issues. Not that they won’t have any tax issues no matter what the deal, but if they can deal with shares on the stock market, it can be at a time and circumstance that is more of their choosing. And then of course, there’s the real deal. Quebecor had problems, like many companies, getting all of their acquisitions coordinated and achieving desired synergies. I believe the market expects Quad management to have a better ability to take advantage of the situation and consolidate plants and impart their way of doing things into the Quebecor business.