The number of printers planning to grow through mergers and acquisitions (M&A) has almost tripled over the last five years, according to The Research Center of the National Association for Printing Leadership (NAPL). Thirty percent of those surveyed for the 2012 NAPL State of the Industry Report said they plan to grow through M&A, up from 22.6% two years ago and just 10.9% five years ago.
NAPL has launched several initiatives to help provide insight into the M&A process and potential. In 2012 it published “Strategic Growth: The NAPL Guide to Mergers & Acquisitions” and presented the first Mergers & Acquisitions Conference. This year it developed a survey-based report on industry M&A practices and a series of M&A workshops.
This summer, NAPL researchers surveyed a group of printing companies throughout the U.S. and Canada, three-quarters of which had completed a merger or acquisition. Results of the research have been published in the NAPL study Mergers & Acquisitions: A Growth Strategy for an Industry in Transition.
“One of the most important reasons for the increased interest in M&A is the growing number of printing company owners who recognize that even a healthy economy no longer creates enough organic growth for everyone, and that the time for a ‘build it and they will come’ approach to business has long passed,” notes NAPL Chief Economist Andrew Paparozzi and Senior Economist Joseph Vincenzino, authors of the study.
“For some participants M&A has been a success, for others it has been an absolute failure. And while some believe M&A is the single best path to profitable growth, others have found it a profit-draining distraction,” they note.
Among those surveyed who have not entered the M&A arena, most (81.0%) say it is because they have “done well on their own,” although one-third admit that they “don’t know the best way to get started.” Smaller numbers say they have hesitated because they were “worried about losing control of their company” (19.0%), “believe M&A is too expensive” (14.3%), or is “too risky” (4.8%).
“Despite their reservations, practically every one of these companies would consider it for the right reasons.” Among those reasons: “Gaining a stronger position in a core market or shortening the learning curve in a target market by acquiring a company already established. The emphasis is on finding solid, profitable partners and on adding skills and personnel, not just the book of business that would be acquired.
“If you are considering M&A as a last ditch effort to drive sales and create positive cash flow, history suggests you probably will not be successful,” they add. “Where M&A activity is driven ‘by strategic objectives that form a match between both parties’, the odds for success are considerably higher.”
Similar concerns are on the agenda for NAPL’s Mergers & Acquisitions Workshops, sponsored by Xerox. The one-day event is an intermediate-level program that features Paparozzi and several members from NAPL’s M&A Team, which has assisted industry buyers and sellers in more than a dozen strategic transactions over the last 18 months.
Workshop sessions include “New M&A Techniques and Strategies,” “Post-Merger Integration, Milestones and Missteps,” “Market Intelligence: Staying Relevant,” and “Assessing Your Options for Growing Your Business Beyond Print.”
The initial program was presented in Chicago on September 7, and a second workshop will be offered in Rochester, N.Y., on November 14. Attendees receive NAPL’s M&A report and M&A book.
Despite all the issues and potential pitfalls that can exist along the M&A path, the NAPL study found that 87% of surveyed companies that completed an M&A transaction reported good results, with 9.7% saying it had exceeded expectations, 27.4% saying M&A had fully met their expectations, and 50% saying it had not met every expectation, but was “overall positive.” Just 6.5% said their M&A experience had fallen far short of expectations, and another 6.5% said it met some expectations, but was “overall negative.”