The Marriage of RRD and CGX from a Competitor’s Perspective
Hire a planner and dust off that old suit because another wedding is in the works! The world has been buzzing about the R.R. Donnelley (RRD) acquisition of Consolidated Graphics (CGX), but is it more likely that they met on adultfriendfinder than eHarmony?
Of course, the financial side is a no-brainer. It doesn’t involve a ton of cash and RRD’s stock is up 112 percent YTD. It’s accretive, deleveraging, and it enables RRD to grow at low cost while eliminating a national competitor. In fact, it seems like such a good deal that The Law Offices of Vincent Wong is investigating whether or not the CGX board met its fiduciary duties to its shareholders.
The strategy and cultural integration is what hangs in the balance for me. It could be more similar to a replay of Judd Apatow’s “Knocked Up” than a thoughtful courtship that weaves two families together. Do these two really belong together?
CGX’s Joe Davis says the company is successful because of its “…ability to provide the service and responsiveness of a local printing company while offering customers the flexible solutions and competitive pricing available from our large network.” I’ll agree with the local part, but as a competitor, I haven’t seen the cross-selling benefits of the network play out on the national level.
The local aspect of CGX might seem to fit in with RRD’s vision to improve its existing position as a global provider of integrated communications, but the nature of the assets is crucial. CGX has been successful because plants have largely operated autonomously and customers have felt like they’re still dealing with their local printer.
In order to obtain the benefits of RRD’s scale, companies will have to integrate. Wayne Peterson wrote a nice article about RRD’s historical ability to succeed with integrations, but to do so could destroy much of the value they have acquired. If companies ceased to operate autonomously, then customers could cease feeling like they’re dealing with their local printer. That’s the “eat my own head” scenario.