Stop the Re-Org Merry-go-round

Well, here we go again; another instance of a large company bankruptcy. The industry has seen a lot of reorganizations in the past decade, with Quad’s just-announced acquisition of Vertis’ assets a particularly pointed example.

Vertis filed Chapter 11 in July of 2008 while closing its merger with American Color Graphics. In November of 2010, Vertis showed up again in bankruptcy court in a voluntary, pre-packaged Chapter 11 filing that wiped away 60 precent of its debt. Then a month ago, Vertis was at it again.

Fortunately, the courts finally acted rationally, disallowing a third re-org in four years, and Vertis was forced into a pre-packaged deal. Quad was there to pick up the pieces.

Quad, which has already picked up the assets of Quebecor—which, in turn, had already done the re-org dance multiple times with World Color and a host of others—was right there, opportunistically, to pick up the hot-potato assets. Does anyone see a pattern?

What might be on the horizon for Quad, and what remains of the storied culture left behind by old Harry Quadracci? Is everyone still wearing the same jumpsuit and smiling for the camera?

What were some of these creditors thinking, and why would they possibly have believed the rosy turnaround plans put forth by the same management teams that sank these ships in the first place? To some extent, they deserve exactly what they’re getting right now—a long, slow burn. In this case and many others, they’re certainly testing the definition of insanity (repeating the same thing and hoping for a different outcome) and getting a positive diagnosis.

That said, I have to say that Joel Quadracci has, from my perspective, done an incredible job with his company. He has dramatically increased the size of the business while creating a liquid market for his family’s assets, and still maintained control of the board and day-to-day management. And I do think this is another great opportunity for the organization, but it comes with massive integration challenges.