It's a Slow Time for Bargain Hunters
Everyone likes a bargain. There was a time when the printing industry's M&A marketplace was full of them — for all the wrong reasons.
During the recession, industry revenues softened dramatically, and the results were predictable. Declining sales forced many firms to merge with other companies or simply to close their doors and liquidate whatever assets remained. The pressure was especially intense on businesses with excessive debt or otherwise unhealthy balance sheets.
These distressed firms were tempting targets for buyers seeking to acquire other companies either as going concerns or, more often, just to roll up their active accounts. Personal circumstances — for example, the dead-end situations facing retirement-age owners who lacked next-generation successors — put more firms on the market at smaller valuations than they would have enjoyed in better times.
Industry valuations had already peaked by the time the recession took full effect, and for many printing businesses, there was nowhere to go but down. It took a long time after that for valuations to stabilize and to begin climbing back to levels that reflected what the companies actually were worth.
Now that industry revenues have started to recover, the picture is different. Because of consolidation, there are fewer firms in operation today than there were 10 years ago. That means bargain hunters will find fewer undervalued companies to sift through. Businesses that survived the recession did so precisely because they stayed financially strong and didn’t lose value to the extent that weaker firms did. Companies like these typically don’t present the kinds of opportunities that bargain hunters are looking for.
Highly motivated sellers still exist: owners who are under pressure from lenders or who face some other set of circumstances that makes them want to seek a quick exit from the business. In general, though, sellers in the current M&A marketplace are as healthy as the companies that want to acquire them—and that’s good news for the industry as a whole.
Prospective buyers may have to recalibrate their expectations about the kinds of offers they will need to make to stable, profitable firms. For sellers, having an accurate and up-to-date valuation is a must. Qualified advisors can answer everyone’s questions about what is and isn’t reasonable in the post-recession M&A landscape.
Thomas J. Williams 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 firstname.lastname@example.org