The National Association for Printing Leadership (NAPL) Research Center’s newly released study, “Mergers & Acquisitions: A Growth Strategy for an Industry in Transition,” reports the facts of M&A in the graphic communications industry, and whether it is the best path to profitable growth or a risk that may not be worth taking.
The new report is one facet of NAPL’s industry-leading expertise in graphic communications mergers and acquisitions, which also includes M&A consulting services from the NAPL Business Advisory Team; M&A Workshops, co-sponsored by Xerox, which premiered at the PRINT 13 show in September and will next be held at the Gil Hatch Center in Rochester, N.Y., on Nov. 14; and the NAPL book, Strategic Growth: The NAPL Guide to Mergers & Acquisitions. Attendees at the M&A Workshops (www.napl.org/events/ma2013/) receive free copies of both the M&A book and the new M&A study.
The 32-page study is based on the results of a survey and follow-up interviews with 88 companies, with annual sales from under $1 million to more than $150 million. “Our goal was to capture the full range of experiences with M&A,” notes study co-author Andrew Paparozzi, NAPL Senior Vice President and Chief Economist. “And we did. For some in our study, M&A has been an unqualified success; for others, it has been an absolute failure.”
Interest in M&A in the graphic communications industry continues to rise, with slightly more than 30% now planning to grow through M&A, compared to just 22.6% two years ago, and nearly triple the 10.9% of five years ago. The study found that the vast majority of those surveyed (87.1%) said their experience with M&A was positive?meeting or exceeding some or all of their expectations.
“There are several reasons for the increased interest in M&A,” notes Paparozzi. “Among the most important 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.
Paparozzi and report co-author Joseph Vincenzino, NAPL Senior Economist, note that the primary M&A goals among survey respondents were to expand the company’s business and client base within markets it is already serving (74.7%), fill excess capacity on existing equipment (57.8%), add new products/services and expand capabilities (56.6%), and diversify the company’s client base (51.8%). Other reasons for M&A included consolidating overhead and other expenses (43.4%) and entering a new geographic market (19.3%)
For nearly nine out of 10 respondents, their M&A involvement was worthwhile, with 50% saying that while it had met some expectations but not others, it was still an overall positive experience; 27.4% said it had fully met their expectations; and 9.7% said it had exceed expectations, working out even better than they had expected. On the other side of the coin, 6.5% said it had met some expectations, but not others, and characterized it as an overall negative, and another 6.5% said it had been unsuccessful, falling far short of expectations.
“Clearly, there are no guarantees in M&A,” note Paparozzi and Vincenzino. “Success is not just a matter of finding a willing company that makes sense and going with it. In fact, turning two companies into one can be quite difficult. Companies soon discover that a successful merger or acquisition entails a significant amount of work?both before and after a deal is completed.