M&A Activity -- Expect a Surge in Mergers
Specialty Printers Aggressively Pursue External Growth
Specialty printers, including all types of label, direct mail, flexible packaging, wide-format, P.O.P., forms and variable imaging/digital printing companies, will aggressively seek growth and greater efficiency in their existing and closely related markets.
Private Equity Billions Will Chase After Promising Printing Segments
The massive overhang of high-yield investment dollars held by and available to private equity firms, venture capital firms and merchant banks has already begun to chase promising targets in the printing industry. These bankrolls had built up during the slow 2000-02 period and there is an urgency to get these funds invested.
The acquisition of the Sheridan Group by two private equity groups and the recently announced transaction to acquire and privatize publicly traded Workflow Management by Perseus and The Renaissance Group are examples of more to come.
Resumption of Consolidator M&A Activity Is More Defined
Consolidators in the 1990s, like Consolidated Graphics, Mail-Well, Schawk, Quebecor World and Taylor Corp., have expressed a more guarded and defined willingness to resume their external growth by acquiring desirable targets in specific geographies. These deals will be aimed at strengthening existing plants through "tuck-in" acquisitions, increasing penetration into desirable locales, building market share in desirable specialties and building national account capabilities. It could also result in "trades" among these large companies with multi-plant holdings. These trades will enable the consolidators to beef up market share in their present markets by trading away plants in markets where they have a smaller, unprofitable presence.
The consolidator activity will be much more selective than the earlier "growth for the sake of growth" transactions that occurred in the mid to late '90s.
It will also feature a much more disciplined approach to deal valuations. These buyers will use more exotic valuation models and there will be less aggressive competitive bidding for desirable targets.