The far-reaching effects of the recession have manifested in myriad ways in the graphic arts industry. There are multiple perspectives on what market changes mean for business. Equipment manufacturers, distributors, financial experts, and print shop owners all have different roles in—and perspectives on—negotiating equipment purchases in the post-recession marketplace.
A New Deal
Rick Riesgraf, chairman of Carlson Advisors in Minneapolis, has served the graphic arts industry as a print management consultant and CPA for 27 years. He said unlike the last two years, several of his clients are purchasing equipment this year.
Riesgraf has helped his clients negotiate better equipment deals this year than were available prior to the recession. One client that purchased a multi-million-dollar machine from an international equipment dealer was able to negotiate heavily on a number of things, including price and the terms of the progress payments, he said.
Clients sometimes need interim financing for progress payments before moving to permanent financing after equipment is installed, Reisgraf added. The equipment vendor essentially helped finance the interim part of the deal before installation. In the past, the vendor would have had a progress payment schedule that was much more aggressive.
“Between the vendors and the financing, we’re seeing companies put equipment on the books at packages like they never have before,” Riesgraf noted.
Negotiation of used equipment sold from one printer to another has also been affected by changing market values.
Tony Fadale, who bought North Seattle Minuteman Press in 2007, negotiated the purchase of some equipment with the company’s previous owner. Fadale said at first the seller and he had different ideas about what the equipment was worth. By presenting research on similar equipment being sold online at websites including eBay and Craigslist, he said the previous owner finally came to know that market conditions prevailed.
“He had to actually come down to what market value is, as opposed to actual value, as opposed to book value,” Fadale added. “There are two different things in this world: reality and what’s on paper.”
Ed Young, senior sales VP at Heidelberg USA, is responsible for the day-to-day supervision and management of the entire field sales team. In his 32nd year in the industry, Young acknowledged Heidelberg’s customers have had a lot of stress in their businesses from a financial standpoint. Today, the credit approval process, the financing aspects of an investment, are taking much, much longer than they used to, he said.
“Arranging the financing, dealing with things like trade-in machines [and] the value of those machines, there’s a lot of complexity when a customer looks at how he’s going to justify and pay for the equipment,” Young explained.
Nick Howard, manager of Howard Graphic Equipment in Mississauga, Ontario, has been negotiating printing, carton production, and bindery equipment purchase agreements for 35 years. Everything is a lot more conservative today than it was in 2008, he said.
Many lenders that had relationships with manufacturers are demanding much more recourse than they did before to support the deal, Howard reported. Recourse is a manufacturer’s provision to be responsible for a certain percentage of the cost of the equipment in the event the purchaser defaults on the agreement.
Howard said there is less interest in financing equipment purchases today than there was a few years ago because the market has been bad. It’s starting to come back now, but banks traditionally don’t risk very much very often, he added.
“They occasionally have these flights of fancy, and they go into the market more aggressively and basically finance anybody, whether it’s housing or anything else,” Howard said. “But they do tighten up, and that’s what they’re doing now.”