What’s Fueling M&A Fever?
Strategics—A strategic acquirer is any print-related entity that views your enterprise as a boon for business. It could be a competitor or an alliance, friend or foe. It could be considering you from the vantage point of how your products/services expand its position, or the value it gets from taking you off the street.
A strategic buyer typically identifies your company based on an insight into your business—and will take over its management and direction. They may know you’re looking to retire, recently lost a vital account or manager, or other fact that underscores the need for purchase.
The word strategic implies that some advantage is gained from joining properties, businesses and markets. Reality says it’s strategic only if it works.
Private Equity—As noted, private equity firms are investors seeking profitable venues for their stakeholders. They invest in multiple industries, typically targeting a 25-plus percent annual rate of return.
The printing industry offers private equity firms multiple acquisition opportunities; strong market segments with outstanding growth potential, multiple models by which to make a return; and potential for geographic or national platforms.
Private equity firms invest by paying a portion of the buy price using capital from a “fund,” then borrowing the balance at a competitive rate. The return comes from growing your business quickly, paying down the remaining debt and getting a higher multiple at exit.
Certainly, the best potential lies with firms experienced in our industry. They already believe in your company and can support you with strategic direction and accessibility to resources—as well as necessary capital. Large private equity firms buy at a higher multiple if your cash flow is consistent, among other considerations.
Employee Stock Ownership Plan (ESOP)—Under an ESOP, fundamentally, you give your employees shares of the company based on what they helped you earn. If you are seeking retirement, a financial institution can help employees buy out the company using current cash flow. Although an ESOP offers a relatively easy and expeditious exit/ownership transfer, it does nothing to ensure the future of your hard-earned business.