An 'Annual Report' for Print Industry M&As
As 2014 winds down, it's satisfying to report that the year has been a mostly good one for mergers and acquisitions in the printing and packaging industry. Looking back, we can see that a normal level of M&A activity has returned to the industry and that—assuming we get no more shocks from the general economy—opportunities for dealmaking will carry over into the year ahead.
For M&As to happen, there have to be investors and buyers. As we've noted before, these key players have tended to make themselves scarce in the industry in recent years. But now the buyers are coming back, searching either for growing or specialized companies to purchase as going concerns or for those with a book of business and perhaps some key assets that can be absorbed in tuck-ins. And, they're offering reasonable multiples of EBITDA and other terms favorable to sellers.
One of the most interesting groups of buyers we're seeing are small private equity (PE) firms from outside the industry. We normally associate private equity investment with big names, big piles of cash, and buy-and-flip acquisition strategies. These new firms, however, operate on a more compact scale. They may be regionally concentrated rather than national in footprint. They may be start-ups with only a handful of companies in their portfolios. But, they're identical to the big players in being well funded, well managed, and tightly focused on targets with attractive niche capabilities, healthy profits, and good growth prospects.
Where do they differ is in their approach to M&A investing? In most cases, when they acquire a company, they are not simultaneously trying to buy several others like it in order to achieve the kind of critical mass or scale that a larger PE firm's strategy might be based on. They also are more inclined to hold onto and cultivate what they acquire. We are currently involved in several deals where the PE investors are pursuing the acquisitions of printing companies as going concerns and then will step in to assist in operating them. They are not merely buying into the industry as disinterested investors—they also want to be actively involved with it as stakeholding managers.