For Sellers, the Curtain Rises Once
The novelist F. Scott Fitzgerald once wrote, "There are no second acts in American lives." Second lives, in the sense of a second chance to sell a printing company at a price attractive to the seller, can be just as rare in the M&A marketplace. Here’s why.
The right moment to sell occurs when the condition of the seller’s business, the intentions of the buyer, and the state of the print market segment in which the seller operates all line up in favor of making a deal. A qualified M&A advisor can counsel the seller as to when that special moment has arrived. But, this good advice will also include a reminder that circumstances probably won’t align this way again and that the cost of missing the moment could be high.
Think of what would happen if you received a desirable offer for your company today but then decided to put off selling for three to five years. In that time, in order to remain competitive as a printing business, you probably will have to install new equipment and take on a corresponding amount of debt. You could just let your existing machinery continue to age, but the buyer you eventually negotiate with will consider the cost of replacing it before making an offer for your business. Either way, your final proceeds from the sale take a hit.
Why do sellers hesitate to seize opportunities that probably won’t come around again? We’ve seen too many worthwhile deals undermined by "the 20 percent syndrome:" the owner’s stubborn belief that the business is worth 20 percent to 30 percent more than the marketplace dictates. Sellers in the grip of this mindset insist on holding out for more, rejecting reasonable offers that don’t square with their inflated notions of what the payout should be.
Personal issues enter the picture when longtime owners who haven’t yet taken that "emotional walk on the beach" find that they have no clear plan for a post-sale career or lifestyle. Time, unfortunately, will not be on their side as sellers while they clarify what they intend to do with the rest of their lives.
The psychology of buyers has to be considered as well. These days, they have a michael kors bags uk short-term mentality when it comes to valuation. Once, a buyer might have wanted to examine a seller’s profitability over several years before making an offer. That changed in 2010-2011 when many printing companies saw their values plummet in the aftermath of the recession.
Now, the buyer might base the offer on only a year’s worth of financial information—or perhaps on the numbers from just a couple of quarters. This tendency on the part of buyers means that a seller who delays could find that his company’s value has declined if the business has a bad year down the road. Large firms and those operating in growth segments like wide-format may be exempt from this "what have you done for me lately" attitude, but for the average commercial printing company, it’s the new normal.
In some ways, owning a printing company you intend to sell is like investing in the stock market. Because the value of what you own can fluctuate unpredictably, waiting for a market "peak" before you act can be a needlessly risky thing to do. It’s better to begin working with your M&A advisor so that when the right offer comes along at the right time, you will be ready. It will be here sooner than you think.
James A. Russell, partner at New Direction Partners, brings over 20 years of experience as a printing company executive having served as CEO of two family-owned graphic communication companies. During his tenure as owner and CEO of Arbor Press, a commercial printing company in Michigan, the company was an eight-time winner of the National Association for Printing Leadership’s (NAPL) prestigious Management Plus Awards program. Arbor Press was also recognized twice during his leadership as one of the 50 fastest growing printers in the country. Contact him at (610) 230-0635, ext. 703.