Mergers and Acquisitions — Deals That Make Sense

“We don’t buy companies to consolidate facilities and shut plants down,” he says. “We buy them to improve and grow them. We depend on existing management to play well in the sandbox with others, including our 68 other company presidents.”

Cohen anticipates less activity from private equity groups as financing pressures will “reduce the competition for quality deal flow in other industries that are more attractive to them.” In the event of a slowing economy, he predicts a decrease in M&A activity overall, since quality companies won’t want to sell if their trailing 12-month results trend downward and negatively impact potential valuations.

Bob Cronin, managing partner of The Open Approach, a boutique consultancy firm, also sees more deals taking place based on geographic considerations, a trend he sees growing in the coming years. One of the reasons is an ownership base that is aging and unwilling to make investments necessary to maintain status quo or take the company to the next level.

“This ownership recognizes the need for new investment and they’re seeking alternatives because they’re not risking everything they’ve built up for one more roll of the dice,” Cronin says. “They’re looking at some of their local competitors and thinking, ‘This is an ideal fit, we’re in the same space. How can we do better together?’ ”

Cronin feels the most attractive options are companies that have significant control within a vertical market—such as healthcare, retail point-of-sale, or pharmaceutical packaging/labels—or unique products, capabilities or customer bases. Digital printing, direct mail and wide-format, along with UV capabilities, still rank high on many lists. The success of VistaPrint has also drawn excitement toward Web-to-print vehicles.

Much of what happens in 2008 will be dictated by the success of the industry itself, Cronin contends. And when private equity deals don’t work out, it can cast doubt on the viability of that model. The perception might not be accurate, but it exists.