Industry M&A Activity : Deals Are in Full Bloom
Judging printers by the types of vertical markets in which they serve, Hyde feels those who address the pharmacy and health care markets are in advantageous positions. Conversely, companies that thrive on state and federal government printing—perceived as “printing without a soul” because of the bid-only, relationship-less environment—or cyclical work such as political printing, can be a difficult sell, according to Hyde. It’s not to say that government and political work aren’t profitable or sustainable, but they are lacking in certainty from a buyer’s perspective.
With the tradition of family-owned printing businesses being passed down from generation to generation waning, Hyde anticipates many Baby Boomers unloading their modest, but profitable, shops in the coming years. It is not a knock on printing or a reflection of its future per se, but the reality is that the children of printing shop owners are opting to go in other career directions.
“As these owners contemplate retirement and, given the challenges of further reinvestment, they are more open to a succession plan involving infrastructure liquidation and transfer of customer relationships to a strategic acquirer,” he notes. “This dynamic creates opportunities for larger companies to grow by acquisition. This is more prevalent than I’ve seen in recent years.”
The traditional web and sheetfed printers remain under pressure, a reality reflected in many of the mergers and bankruptcies that are taking place, notes Bob Cronin, managing partner of The Open Approach, which also provides M&A consultation to the industry. By the same token, he feels there are substantial opportunities for firms that offer, for example, an effective variable component, a complementary marketing services function or an innovative IT-based advantage. Labels and packaging also carry significant interest, according to Cronin.
“The primary driver behind deals is still customer demand for a company’s particular products, services and value-adds,” Cronin states. “No matter if it’s a strategic acquirer, investor or private equity firm, they all want to know whether the company in question can thrive, or has the opportunity to do so. Positioning is key, which is what makes a good advisor valuable.”