RR Donnelley buys CGX – Strategic Brilliance or Competitors’ Opportunity? – October 2013 M&A Activity
The printing industry was abuzz this past month with opinions about why Consolidated Graphics, the billion dollar master of the commercial printing rollup, agreed to be acquired by RR Donnelley. The deal, valued at $620 million plus assumption of Consolidated Graphics’ debt, did not reward the shareholders of Consolidated with a premium – the company sold out effectively at its current market price. Apparently top management at Donnelley liked what they saw, but only at a relative bargain price.
According to much of the buzz, many folks in the industry, myself included, view this deal as a marriage of strange bedfellows. The buyer is the undisputed printing industry behemoth that serves large corporate accounts through its integrated network of high volume facilities, sophisticated data management, and well-oiled corporate structure; the seller a collection of mid-market commercial printing shops mostly purchased from owner-operators during the 1990’s rollup craze in the printing industry.
Industry consultant and pundit Wayne Peterson wrote a cogent and somewhat compelling argument that Donnelley knows exactly what it’s doing, and that it will use the Consolidated Graphics network to deliver product locally to large corporate accounts that have signed onto its comprehensive “we do it all” print management solution. Printers that compete with Donnelley and Consolidated, most notably Dustin LeFebvre of Specialty Print Communications, have blown the battle bugle and urged independent printers to get into the ring and fight. The prize is the sales reps and customers that may feel that their “local” Consolidated printer is now just another cog in the giant Donnelley wheel. We have seen numerous comments that simply note the writer’s belief that Donnelley will consolidate Consolidated, closing plants once it absorbs as much of the top-line revenue as fits its own strategy. As readers of The Target Report know from our post reviewing August ’13 transactions, Donnelley is not sentimental about closing formerly very successful printing plants, having already closed five this year. Whichever way this plays out, I suspect that the independent mid-size commercial printer will be watching closely.