The recently announced M&A transaction involving Hutchison Allgood and Graphic Visual Solutions contributes three lessons learned to the continuing conversation about growth by strategic transaction in the print and graphics communications industry.
Lesson 1: Privately-owned Companies Make M&A Risk-Reward Decisions with Both Rigorous Analysis and Entrepreneurial Gut
Graphic Visual Solutions owners Bryan & Wendy Hall stepped up to the plate "big time" with this investment. It would be a mistake to think that the structure involves shared equity or other "merger"-like consideration. This is about real money with well-thought out risk and reward analysis. Kudos to the Graphic Visual Solutions team for "doing it the right way." But after all the spreadsheets, ultimately the decisions come down to entrepreneurial gut feeling about whether or not to pull the trigger. That's when advisors stop advising and managers stop managing and it's time to listen to principal's decision, like an edict coming down from the court. I could almost hear John Candy's voice from the movie "Stripes": "LET'S DO IT!!!!"
Lesson 2: Sometimes it Makes Sense to Pay Top Dollar for a Good Company
Without breaking any confidences, it's fair to assume that the valuation of Hutchison Allgood took into account a multiple of earnings and a premium for market presence. This is in stark contrast to the numerous distressed tuck-in situations that populate the M&A landscape without "e" in EBITDA. The outstanding strategic fit, excellent customer base, and capable personnel all contributed to making this an attractive opportunity. Graphic Visual Solutions stayed focus on a really good company rather than investigating numerous distressed situations.
Lesson 3: In-Person Meetings among Principals Are Still the Best Way to Bridge Gaps and Close Deals
As an M&A advisor with a national practice, I naturally emphasize the use of e mail, Go to Meeting, and cell phone as technology tools to enable deal-making. But the Graphic Visual Solutions-Hutichison Allgood transaction is a good example of the importance of principals getting together to discuss the concerns and impediments that naturally arise in the M&A process. Both sides had engaged reputable consultants (NAPL for Graphic Visual Solutions and New Direction Partners for Hutchison Allgood) and capable lawyers/accountants, but the final strokes needed frequent interaction among principals. Credit goes to Bryan Hall and Al Hutchison for their patience, commitment, and willingness to keep going even when the inevitable bumps in the road came up.