CONSOLIDATORS - Slowing, but Growing
PI: What do you envision for consolidation over the next year or two?
Norton: It's apparent that the financial markets are looking at consolidators in all industries with more skepticism due to so many consolidation failures. Moreover, so long as financiers believe that there are much better financial returns achievable in other industries, the printing industry won't experience the acquisition activity that it experienced just a few years ago.
Davis: Some of the people who were driving consolidation may have a debt level now that won't allow them to make any acquisitions. The number of people who are actually acquiring companies is probably less than it was in the past. A lot of companies that were for sale in the last three or four years have been sold, so I think the pace of acquisitions might be a little slower in the future because there's not as many companies available for sale. The same forces that we've had driving consolidation are still here: technology, capital availability, requirement to invest in new equipment, and customers that want a national organization to service them from many locations.
Thompson: The fragmented nature of our industry begs for consolidation. If some of today's consolidators fall by the wayside, it is likely that their places will be taken by others. The level of consolidation activity for the next couple of years will likely be reduced significantly over that which we saw in 1999 and 2000. When a particular activity is not rewarded by the financial markets, that activity is either greatly reduced or foregone completely. Today, Wall Street is not paying for growth by acquisition.
What the markets want to see is debt levels being reduced, "same store" growth and the realization of operational synergies. The fragmented industry will still be fragmented in two years and we, the consolidators who make it through this, will be better able to capitalize on the market conditions and reward our shareholders in the new environment.