M&A Activity: The Invisible 'Tuck-in' Deals
When Quad/Graphics announced last fall that it was acquiring Baltimore-based Vertis Inc. for $258.5 million, the industry let out an impressed whistling sound. But, while the retail advertising insert business will be a huge coup for Sussex, WI-based Quad—Vertis posted about $1.1 billion in sales for 2012—it was easily the most noteworthy deal of the past 12 months.
One conclusion that can be drawn from examining the list of the most prominent acquisitions during that time is that couplings of high-dollar generators have sharply declined. That would be a safe assumption. Here's a sampling of the industry's next-biggest M&A splashes:
- Ovation Graphics of Fort Worth, TX, struck a deal to acquire Motheral Printing.
- Walsworth Publishing, Marceline, MO, added Ovid Bell Press of Fulton, MO.
- Ripon Printers in Ripon, WI, swung a deal to nab New Berlin, WI-based Sells Printing.
It would be presumptuous to say that M&A activity, across the board, has taken a hit. There has been a fair amount of activity near the $5 million to $15 million range, situations where unions have taken place due to the complementary nature of their products and services, while others have forged working relationships in order to cross-sell off each other's platform. But what isn't receiving much attention—or ink—is the phantom tuck-in, simply because many companies just aren't trumpeting asset purchases.
So, the dealmakers are hard at work...we're just not getting wind of it on the national level. Bob Cronin, managing partner of M&A consulting firm The Open Approach, points out that business is brisk on the label and packaging end, but a lion's share of today's deals involve just books of business.
"It's a difficult to robust market, depending on the vertical and product segment," Cronin says. "The last few years have been difficult for print providers. The economy is one factor, but the fundamentals of the industry and its value proposition have changed. Those who understand the impact of change may still prosper by providing new value solutions to the customer. And, those who believe it is a short-term market downturn and have failed to adjust will fail."