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.
Another group of buyers who became active in the M&A market this year are owners of strong, profitable printing and packaging firms seeking to take their companies to the next level. These owners may not have been in buying mode four or five years ago, but now, they've come to understand that achieving organic growth in their existing markets is going to remain difficult. They see acquiring other companies as the surest route to expanding sales or entering promising new niches—an attitude that should be fundamental to every growth-minded printer's strategic planning.
Will 2014's M&A momentum keep driving us forward in 2015? At New Direction Partners, we think it will. As always, much depends on the segment of the industry that a company occupies: a general commercial printer, for example, probably will not attract as much attention from buyers as a packaging printer, a label printer or a wide-format shop. But the industry as a whole is stable, and the companies that are still here have restructured themselves to a point where they can begin to think about growing again instead of just hanging on. That makes the forward look as encouraging to take as the backward glance.
About New Direction Partners
New Direction Partners (NDP) is the print and graphic communications industry’s leading provider of advisory services for firms seeking growth and opportunity through mergers and acquisitions. NDP assists its clients by giving them expert guidance and peace of mind at every stage of the process of buying or selling a printing company. Services include representing selling shareholders; acquisition searches; valuation; capital formation and financing; and strategic planning. NDP’s partners have participated in more than 300 mergers and acquisitions since 1979. Collectively they possess over 200 years of industry experience with transactions in aggregate exceeding $2 billion.
For information, e-mail info@newdirectionpartners.com.
James A. Russell is a partner in New Direction Partners (NDP), the leading provider of advisory services for printing and packaging firms seeking growth and opportunity through mergers and acquisitions. NDP assists its clients by giving them expert guidance and peace of mind at every stage of the process of buying or selling a printing or packaging company. Services include representing selling shareholders; acquisition searches; valuation; capital formation and financing; and strategic planning. NDP’s partners have participated in more than 300 mergers and acquisitions since 1979. Collectively, they possess more than 200 years of industry experience with transactions in aggregate exceeding $2 billion.
For information, email info@newdirectionpartners.com.