Industry Merger & Acquisition Activity Continues to Flourish

Merger and acquisition (M&A) activity for companies in the graphic communications industry continues to flourish as we head into the final quarter of 2011. Members of our National Association for Printing Leadership (NAPL) Business Advisory Team believe the challenge owners face in utilizing existing equipment, the need to drive savings and increase capabilities through consolidation savings and the overall long-term trend of industry consolidation are all contributing to strong M&A activity nationwide.

One of the often repeated myths about mergers and acquisitions is that they are only for big public companies. In reality, an estimated 95 percent of the current M&A activity taking place in the US printing industry involves smaller, often family-owned, businesses. Smaller printing companies that are in trouble often cannot sell the entire business as a going concern and generally will benefit more from selling it in pieces versus as a whole.

These companies, in many cases, find that their real and most saleable asset is not their physical plant, but their customer base. With printing company equipment valuations continuing to decline because of surplus supply, the best opportunity for a company to maximize shareholder value may be to liquidate its plant and join forces with another company that has scale and name recognition in the marketplace.

Who’s Buying? Who’s Selling?

Another M&A myth is that there are more sellers than buyers. In actuality, M&A is an effective growth strategy for many companies today. This may be a challenging time for our industry as a whole, but it is also a time of opportunity for those moving strategically, and a small group of successful companies are doing very well, despite an overall industry decline.

For companies that are enjoying success in 2011, a redistribution of existing sales is driving their expansion. Industry leading companies, which comprise about five to 10 percent of our industry, are growing, and they’re doing so by taking market share from the 90-95 percent of industry companies that are failing or just treading water. In many cases, they are accruing that market share through acquisitions or business consolidations.

Companies that may have an interest in M&A are sometimes put off by some other M&A “myths,” among them: most valuations use an EBITDA method, financing for M&A is a huge impediment, or companies engaging in M&A may lose a third of their customers. It’s unfortunate if such fears are preventing companies from investigating M&A possibilities because none of these myths are true.

Happily, such unfounded concerns do not seem to be slowing down M&A activity these days. The response rates to our M&A outreach efforts, for example, make it very apparent to NAPL that the stigma that was once attached to owners meeting to discuss mergers and acquisitions continues to lessen as companies understand the need for consolidation.

NAPL is recognized as a trusted and objective resource for confidential M&A services, with contacts that are unique within the printing industry. It offers company executives advisory services to help them build long-term shareholder value through strategic M&A activities. Services also include helping companies with strategic sale of a business, strategic partner assessment/procurement, acquisition of general intangibles and post-merger integration services.

If you’re an owner looking for a way to rejuvenate or even reinvent your business, an M&A strategy is one you may want to consider.For more information, contact NAPL senior vice president Tim Fischer at 800-642-6275, ext. 6376, or tfischer@napl.org.

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