A Tale of Two Cities, the Best of Multiples, the Worst of Multiples – April 2014 M&A Activity
It was a Tale of Two Cities for sellers of printing companies in April. For some, it’s the best of times; they appear to have chosen wisely, believed in the power of the internet to transform the business of print, they saw the light and felt the hope of spring as they embarked on their journey. The market anoints these fortunate few with the ultimate reward – the high multiple.
For others less fortunate or tied down by the weight of untimely past investments, it’s the worst of times; they appear foolish to have believed in the business of print, the path forward is dark, they feel the despair and hardship of winter as they trudge forward. The market’s invisible hand smacks down and delivers punishment – the low multiple.
Italian printer Pixartprinting has differentiated itself in the competitive commercial printing market by developing a very user-friendly technology platform, delivering printed products to graphic designers, print brokers, and local printers that act as resellers. Established in 1994, the company reached sales of $77.8 million in 2013 and served 100,000 customers with over 450,000 orders. With only 330 employees, the company’s average order was $173. Despite the small order size, the aggregate revenue equates to $235,900 revenue per employee per year, very respectable in the US commercial printing industry. EBITDA was an impressive $20.85 million, 26.8% on sales. In early April, Vistaprint announced that it acquired Pixartprinting for an offer consisting of mostly cash plus some assumed debt, totaling over $200 million, an astounding 2.6 times annual sales. Not counting the additional potential earnout provision which could yield the sellers another $14 million, the sellers received approximately 9.8 times trailing EBITDA.
Brown Printing was founded in 1957 and enjoys a reputation as one of America’s finest printers capable of printing high-volume, very high-quality publications and catalogs. The company is projecting sales of $350 million for 2014, and prints over 1,000 different magazines and catalogs. Employing 1,850 in several US plants, Brown’s revenue per employee was $189,200 per year. Brown has been making moves to take advantage of new opportunities to serve its customers. As we reported in The Target Report in April 2013, Brown acquired Nellymoser, an innovator in mobile and print-to-digital campaigns serving the advertisers in the magazines printed by Brown. Nonetheless, the company’s reputation and mobile initiatives were not enough to drive a high valuation. Brown agreed to be acquired by Quad/Graphics for $100 million, equal to only 0.29 times projected sales. Brown’s parent company, Gruner + Jahr, does not break out earnings for Brown, however Quad/Graphics reported that the purchase price will be less than 4.0 times adjusted EBITDA after taking anticipated synergies into account. In other words, the unadjusted multiple was likely even lower.