The Target Report: Apollo Trades Textbooks for Wallpaper & Pillows
Apollo Global Management, the massive publicly traded alternative investment firm, acquired on-demand fabric printing company Spoonflower through its platform company, Shutterfly, the on-demand photobook printing company. The very next day Apollo announced that it was divesting its interest in McGraw Hill, the publisher of educational textbooks and digital content that serves educational markets.
Spoonflower has transformed the market for on-demand home décor within the soft goods categories. The on-demand digital printing platform enables consumers to design their own patterns on a multitude of products such as pillows, blankets, sheets, towels, curtains, tablecloths, napkins, and placemats. In the event you want matching walls with your chosen design motif, on-demand custom wallpaper is also offered. If you are handy with the needle and thread, fabric can be printed by the yard for you to sew your own creations. Available substrates include a variety of linens, cottons, polyesters and even spandex.
The company boasts that its platform hosts 3.3 million unique creative individuals that upload an average of 4,000 new designs every day. Over 25,000 designers have posted their designs into the public space on Spoonflower, available for consumers who browse through all the posted patterns to select, apply and order printed items. The designers are not hidden behind the Spoonflower façade, rather they are featured, lauded, awarded in ongoing design competitions, made known to consumers browsing the website, and paid a commission when their designs are ordered.
Strategically, the Spoonflower acquisition clearly fits into Apollo’s Shutterfly platform. Apollo acquired Shutterfly, the leader in the digital photo storage, prints processing and personalized merchandise segment, in June 2019 for $2.7 billion. Just to make sure that it would be the dominant player in the highly competitive and fragmented photo space, Apollo simultaneously snaped up Snapfish, the runner up to Shutterfly in the photo books and related online photo products printing segment. Included with the Shutterfly portion of the initial roll-up deal, Apollo also acquired Lifetouch, the school photography company that Shutterfly had itself previously purchased.
Other brands owned by Shutterfly include Groovebook, an app that prints monthly photobooks from its customers’ phones, and Tiny Prints, a printer of customized announcements, invitations, and note cards. The collective power and scope of Shutterfly’s on-demand printing capabilities enables consumers to customize their printed communications and environments, from birth announcements to graduation commemorations to home decorations. It’s one more vote of confidence from the big money folks in the future of printing, as long as its digital, on-demand, and personalized (see The Target Report: On Demand Everything – May 2021).
Platinum Equity announced the acquisition of McGraw Hill from Apollo one day after the Spoonflower deal was made public. Platinum Equity has significant holdings in companies that are print-centric, so is no stranger to print. However, it would be wrong to say that McGraw Hill, the purveyor of educational content, is really still a book publisher at its core. As we noted back in 2012 when Apollo acquired what was then called McGraw Hill Education, it seemed to us that Apollo’s goal was to use the textbook business as a launching pad for investment in digital educational products. At the time, publishers of educational textbooks were struggling as governments cut back on purchases of books and the transition to online digital content was past the initial gestation stage. (see The Target Report: Will Private Equity Accelerate Migration to Digital Content Delivery in Education? November 2012). With a purchase price of $2.3 billion at the time, McGraw Hill Education was considered a distressed asset in need of new direction and a systemic turnaround.
Lest there be any doubt about the move to digital delivery of educational content, Apollo’s senior partner who announced the sale to Platinum Equity complimented the McGraw Hill team which “demonstrated tremendous agility and innovation in transforming the company from a print-centric organization to one that today provides engaging, intuitive and effective digital products that help drive student success.” Under Apollo’s ownership, McGraw Hill acquired six digitally focused acquisitions that feature recurring revenues and higher margins. The business now generates more than $1 billion annually from digital products, representing in excess of 60% of total revenues, up from only 25% when Apollo initially acquired McGraw Hill’s education division. Even more impressive, digital products now represent 80% of revenues within McGraw Hill’s business segment that serves higher education.
Platinum’s stated mission in acquiring McGraw Hill is to continue the company’s dedication to support education globally, with a clear focus on investing in digital learning tools. Looking back on the past year of forced online learning, it looks like a good bet that printed textbooks, while not totally going the way of phonebooks, will be less and less the bedrock tool of learning in the future.
Cathedral Corporation, an upstate New York-based direct mail company, announced the acquisition of Letter Concepts. The acquired company, located in Connecticut, is a highly specialized direct mail company, providing personalized, targeted, and segmented direct mail fundraising campaigns for Catholic dioceses. You might call it a marriage made in heaven, as Cathedral itself has more than a century of experience providing fundraising support services to Catholic churches and dioceses. Cathedral and its new acquisition address the specific needs of their target market with a mix of products and additional services that includes, among other items, offering envelopes, pledge reminder mailings, online donation websites, mobile giving applications, contribution tracking, check depositing, lockbox services, and social media advertising.
In another, but diametrically different, example of an acquisition of a direct mail company that services a highly targeted and defined market vertical, Intellus acquired South Jersey-based Maple Direct. The acquired company specializes in marketing for the casino gaming industry. With offset, digital printing, and laser personalization imaging capabilities, Maple has additional locations in Arizona, Florida and Louisiana. Intellus was formed in 2019 when IBS Direct purchased ClientLink, a direct mail and fulfillment company in Montgomeryville, Pennsylvania, a year after IBS Direct itself was purchased by Logan Marketing Group. With the addition of Maple Direct, Intellus now markets itself as a fully integrated marketing organization.
Specialty Print Communications, aka SPC, located in Niles, Illinois, purchased FuelPop Marketing. The company announced that the acquisition expands its robust printing and mailing capabilities into a “fully integrated marketing toolkit.” The acquired company provides creative services, hyper-targeting and integration of digital marketing.
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Mark Hahn is a managing director and founder of Graphic Arts Advisors, a boutique strategic financial advisory and consulting firm focused exclusively on the printing, packaging, mailing, marketing services, brand management, and related graphic communications industries. With more than 35 years of graphic communications experience in the areas of finance, operations, sales, M&A, and general management, Hahn has served as chief financial officer, chief operating officer and other senior positions with several commercial printing companies, as well as founding and eventually selling his own printing company.
The firm assists company owners and management, as well as their lenders, investors and shareholders in the following areas: mergers and acquisitions, sale of business, strategic and financial advisory, capital structure and funding, financial analysis, interim and turnaround C-level management, business valuations and serving as consulting experts. Hahn is the author of The Target Report and is regularly published and quoted in printing industry trade and management journals.
Mark Hahn can be reached at (973) 588-7399 or firstname.lastname@example.org