"I may not know everything, but I know what I like." We base many personal decisions on this bit of homespun wisdom, and more often than not, it leads us to the right choice. It’s also not a bad starting point for a preliminary review of printing companies identified as candidates for acquisition.
It looked like a good fit. The seller, unfortunately, didn’t see it that way.
The sale of a company can’t proceed until the owner has a good handle on value, and many of our conversations about establishing it naturally are with clients who are taking their first steps toward selling. But, we also urge clients who aren’t in selling mode to conduct valuation as a strategic exercise for sound financial management.
Because of consolidation, there are fewer firms in operation today than there were 10 years ago.
It goes without saying that the rosier a company's financial picture is, the more attractive it will be when the time arrives for the owner to sell the business. That is why building business value must become job number one for owners, stockholders, and their managers in anticipation of a sale.
There are two ways to build a printing company’s top line: by increasing share of market, and by increasing share of customer.
If you are in the market to acquire, chances are excellent right now that the type of company you want exists and is in play. Even with the maturing and consolidation of the industry, the base remains remarkably diversified in terms of process, product and sales volume. As we and our other New Direction Partners colleagues have been reporting recently, M&A activity around these companies is finally back to its pre-recession level—a strong signal to buyers that the time to act is now.
Nobody likes interruptions to their best-laid plans, but they happen—and M&A deal making isn’t exempt from them. When something happens to impede the sale of a company, it’s natural to want to proceed with caution until the obstacle is safely out of the way. Sometimes, that’s the correct strategy. In other cases, it can be a mistake.
Knowing from the get-go exactly what you want to accomplish by purchasing another firm puts you in a winning frame of mind and increases the acquisition's likelihood of success. At New Direction Partners, we know that when a prospective buyer comes to us with a clear picture of the kind of company he or she wants to buy, we can zero in that much more quickly on candidates that will be complementary or accretive to the buyer's present business.
Companies that achieve new capabilities by educating and re-equipping themselves at trade shows shouldn’t keep their progress a secret. Whether your aim is to be attractive as a seller or credible as a buyer, you’ll want your company to be known as one that’s able to deliver whatever its customers want to buy, especially when those products fall outside the definition of traditional print manufacturing.
It’s possible to muddle along without a written business plan, and unfortunately, that’s what many printing companies do. But, at the M&A stage—a stage that New Direction Partners believes all printing companies will reach eventually—the absence of a business plan makes it all but impossible to move forward with a deal.
In my experience, when differences about selling price and deal structure come up in M&A negotiations, they typically aren’t small. They can be reconciled, but doing that requires flexibility and seriousness on both sides. In M&As, learning through mistakes benefits nobody if the wisdom comes only after the deal has died. It's always better to grasp the opportunity with a clear-eyed understanding of the facts going in.