Stop the Re-Org Merry-go-round

Well, here we go again; another instance of a large company bankruptcy. The industry has seen a lot of reorganizations in the past decade, with Quad’s just-announced acquisition of Vertis’ assets a particularly pointed example.

Vertis filed Chapter 11 in July of 2008 while closing its merger with American Color Graphics. In November of 2010, Vertis showed up again in bankruptcy court in a voluntary, pre-packaged Chapter 11 filing that wiped away 60 precent of its debt. Then a month ago, Vertis was at it again.

Fortunately, the courts finally acted rationally, disallowing a third re-org in four years, and Vertis was forced into a pre-packaged deal. Quad was there to pick up the pieces.

Quad, which has already picked up the assets of Quebecor—which, in turn, had already done the re-org dance multiple times with World Color and a host of others—was right there, opportunistically, to pick up the hot-potato assets. Does anyone see a pattern?

What might be on the horizon for Quad, and what remains of the storied culture left behind by old Harry Quadracci? Is everyone still wearing the same jumpsuit and smiling for the camera?

What were some of these creditors thinking, and why would they possibly have believed the rosy turnaround plans put forth by the same management teams that sank these ships in the first place? To some extent, they deserve exactly what they’re getting right now—a long, slow burn. In this case and many others, they’re certainly testing the definition of insanity (repeating the same thing and hoping for a different outcome) and getting a positive diagnosis.

That said, I have to say that Joel Quadracci has, from my perspective, done an incredible job with his company. He has dramatically increased the size of the business while creating a liquid market for his family’s assets, and still maintained control of the board and day-to-day management. And I do think this is another great opportunity for the organization, but it comes with massive integration challenges.

A third-generation printer, Dustin LeFebvre delivers his vision for Specialty Print Communications as EVP, Marketing through strategy, planning and new product development. With a rich background ranging from sales and marketing to operations, quality control and procurement, Dustin takes a wide-angle approach to SPC

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  • PrintingChicago

    Dustin, I don’t know you. But you are clearly a man of courage to lay out the truth about the big players and put your name on it. Thanks!

  • Printing Houston

    You are right on. I competed Vertis in a fair manner. While the courts continued to offer them bankruptcy protection, they continued to offer our clients printing for the cost of paper and ink. I know of three other regional printers who were driven out of business by these tactics. How is that good for our economy? And how did those vendors who were screwed by them twice respond?… by continuing to sell to them while raising my prices and the prices of other good paying customers to finance their write-offs. Its just ridiculous that our legal system allows this type of activity. it borders on criminal. Hopefully Quad Graphics will have the intelligence and business savvy to run this company well and make it profitable. Good riddance Vertis.

  • IJS..

    Quad has moved into the Dallas commercial market with the acquisition of Williamson Printing. Same story, pricing 30% below what same work was selling for. More companies go broke from low prices than high, always been true. Why Quad mgmnt doesn’t understand that is surprising.

  • Industry grief

    Couldn’t agree with you more, Dustin. What’s even more despicable is using the Chapter 11 filings to avoid paying the severance you offered to the people you’ve laid off. That’s exactly what’s happening now and the court should not allow it. The court language is "Authorized but not directed to pay". If Quad is a complicite in this behavior, they should be on a list of shame as well.

  • Tom Marin

    This morning on the TV Show ‘Morning Joe’ Newsweek/Daily Beast editor Tina Brown announced that Newsweek will cease print production by the end of 2012, and in 2013 will shift to an entirely digital format. Surprise! They can’t make any money with their aging demographics that want to gain news using that pesky thing called the Internet, like this blog. The closing of Newsweek tells you all you need to understand about the "Print" business. Strong brands like Business Week are purchased by even stronger brands like Bloomberg and weak brands, like Newsweek, go out of business following their big "all digital foray." What’s really surprising is those in the print business always seem so shocked when one of the ‘leading’ brands takes a nose dive.

  • PaulAbdool

    I always like your articles Dustin!

  • Chuck Koehler

    Couldn’t agree with you more Dustin. I am one of the Vertis Employees that won’t be getting promised severance. I am currently unemployed for the first time in 32 years and ironically not due to the work I was doing not being profitable.

    For more or less the same reason I was eliminated from a job at Heidelberg that I held for 12 years. Unfortunately I don’t think it is just printing – but the state of business here in the US. Even though corporate profits are the highest they have been in over thirty years, companies can’t or won’t consider long term profitability, and in turn "harvest" profits immediately until the company either restructures or enters bankruptcy.

    The very people who structure those deals get huge bonuses, and then cut the professionals during the reorganization. It was these professionals that were responsible for the profits being as high as they were in the first place. They are also the workers with the highest salaries. And so it goes through cycles of reorganization or bankruptcy all the while the perpetrators reap the rewards as the professionals get the axe – and many times the blame – after all, there has to be a scapegoat!

  • Big H

    Thank goodness a bankruptcy judge finally put a bullet in Vertis’ head and put them and the rest of us out of our misery. As you accurately described Vertis has been a danger to itself and all others in the insert market. I am ecstatic they have finally been eliminated from the market.

    Creditors and vendors were complicit and enabled Vertis to continue this behavior. They deserve what they get which will be not much to nothing.

    Quad I hope learned a lesson when they swallowed Quebecorp. You can’t operate a business when you sell the product for less than the cost of manufacturing and distributing it. Quad inherited horribly priced contracts from Quebecorp and it has had a significant impact on their operations. Their share price has dropped from the high 40’s to the mid-teens since the Quebecorp acquisition. Vertis’ contracts are as badly priced as Quebecorp’s were. Vertis was the new Quebecorp. Hopefully Quad will stabilize and lift pricing in the insert market.

    Long term the insert market will continue to decline and eventually die. Hopefully Quad has a 5 to 7 year exit plan to get out of the insert market before they get sucked under.

  • CFD

    Tremendous article. Finally someone has said it. Our customers big and small should read this, especially the CEO’s. This is going to allow us regional players to survive and charge a "fair price" for all.

  • smiff

    Vertis employee here. 23 yrs. Seen em’ come and seen em’ go. Every time this happens, top execs get a retention bonus. ACG was 9 quarters in the red and they got million dollar bonus to stay on through the transition. WHY? For running your company into the ground? Same with the current bunch. 3 in 5 yrs. and they’re going to get a bonus, while the employees get layoffs, and the vendors get stuck with unpaid bills. Can’t speak for other plants, but ours went on a paper buying spree in Aug., Sept., and right up until the chapter 11 was declared. They knew they were gonna screw over these companies, and had no qualms about it. I got mine and the heck with the rest of you. That’s the Vertis executive mindset. Private equity, ain’t it wonderful. Maybe a mgmnt. team that actually knows how to run a printing company will fix the problems that 15 plus years of idiots have created.