Is the Commercial Printing Industry Ripe for Another Wave of Consolidation? – June 2013 M&A Activity

Consolidation in the commercial print space heated up in June. Of special note, at least to me as the former owner of a commercial printing company, is the return of Consolidated Graphics (CGX) to the deal table. The company announced that it is acquiring Universal Printing Company in St. Louis, Missouri. CGX, arguably the most successful of the consolidators that rolled through the commercial printing industry in the 1990’s, has been absent from our deal log in the two years since we started The Target Report. Could this latest transaction be a signal that owners of commercial printing operations that are well managed can expect valuations to improve and/or that those owners’ expectations of value have reached equilibrium with buyers’ willingness to pay?

There were two commercial printing transactions in the Philadelphia area: Intelligencer Printing acquired Lancaster Ultra-Graphics, and Phoenix Lithographing merged with its neighbor, Innovation Printing. Midstates Printing in Aberdeen, North Dakota was the successful bidder in the 363 sale process in the Chapter 11 bankruptcy of Jacob North Printing in Lincoln, Nebraska. On the smaller end of the scale, two separate members of the Allegra franchise family, one in Urbandale, Iowa and the other in Winston-Salem, North Carolina, were successful in their effort to acquire local small commercial printing and copying shops.

Over the past several years, large print management firms have assumed the task of sourcing and procuring the printing for many large corporations. Taking advantage of the endemic overcapacity in the commercial print industry, these print management firms often introduce a hyper-competitive purchasing process, replacing the existing long term relationship between a printer’s key corporate customer and its sales representative. We expect that as the over capacity gets wrung out of the industry, there will be fewer opportunities for these firms to beat down the printers’ price, and as their own margins get squeezed, the print management firms will head upstream to design and content creation where margins may be greater. Innerworkings, one of the most successful print management firms, has taken another step in that direction with its acquisition of Professional Packaging Services headquartered in Bradford, UK. The acquired company designs high end packaging on behalf of its clientele, outsourcing all final manufacturing.