Consolidation in the Graphics Industry

Back at the end of Feb., when the economy hit a low point, I said to our management team that we are not participating in this recession any longer. We are going to improve every month, and luckily we have. Are we all through this? It’s hard to tell for sure. The first quarter was challenging for everyone, including Agfa. There were declines in demand for everyone and every type of product. I believe we are moving to the other side of that now. Part of the challenge, however, has been the lack of available credit. That situation has yet to materially improve.

Let’s face it, we are at an extraordinary time in our history, both domestically and internationally. As I write this, we are witnessing unprecedented changes in virtually every sector, and unfortunately, the printing industry has not been immune to this economic activity. Current economic conditions have forced companies to look at competitive advantages and redundancies, and combine efforts where it makes financial sense. Hence the up-tick we’ve seen in consolidations in recent months.

When Change is Necessary

Some business leaders and economists suggest that consolidation should be considered part of the natural selection within the business world. If you submit to this idea, it would also suggest that consolidation is not unique to any one industry; rather, it is common to virtually every for-profit sector. And this holds true no matter where you choose to look, or what example you choose to use.

Many companies within the printing industry have very long and rich histories. Some were started in basements or even garages, and have been passed from generation to generation. Today, many of those companies are going strong, while others have either reinvented themselves or completely ceased to exist. Thanks to fluctuating market conditions, the latter frequently can and does result in consolidations.

Agfa, of course, is no stranger to consolidations. The company can trace its roots back to the early 1800s, when a color dye factory was established near Berlin. Fast forward a few years, to 1873, and it was registered as the ‘Aktien-Gesellschaft für Anilin-Fabrikation,’ and would eventually come to be known by the acronym, AGFA. Agfa has continually evolved over the years, and that’s the approach every business has to take in order to be successful.

Can Consolidation be Good?

We are seeing more printers doing jobs over larger geographical areas. Previously, a commercial printer would have served only a specific local region, and they didn’t worry about anyone or anywhere else.

Today, printers in Chicago can service customers on Lakeshore Drive, or anywhere around the country or the world. Just as technologies like the Internet have taken away some business, those technologies have also provided printers with the means to expand their customer base. This, too, has spurned consolidations and acquisitions.

Companies that have grown organically often become profitable targets for other companies seeking to improve competencies or fill voids within the market place they target. In these cases, there were synergies and consolidations that just make good business sense.

What’s Next?

I’m not going to speculate on which big companies will come together due to consolidation. We are seeing things that are unprecedented on a regular basis, it seems, and there will be some pain in the interim.

This means some jobs will be lost while others are created. Does that lessen the pain for those whose jobs or businesses don’t survive? Of course not, but one of the things we all have to do is be realistic about the marketplace. Anyone who picks up a newspaper or turns on a TV knows what is going on.

We have all made tough decisions over the last couple of years, but they were good ones, and they have positioned us well for this round. We must service our customers, take care of the current business we have and grow our business going forward. This is true for every business, especially now.