The Inside Scoop: Mergers and Acquisitions

Mergers and acquisitions (M&A) in the printing industry have never been more relevant, with record-breaking activity in 2021 and 2022, followed by blockbuster activity in 2023 and continuing into 2024. The result of this surge of activity has been that, today, there are more buyers for printing companies than ever before. This is surprising to many given that print was largely blacklisted by buyers during the dark days of the Great Recession. Today’s dynamic landscape includes a diverse array of acquirers, including private equity firms and family offices, strategic buyers, and individual investors. Each type of buyer brings unique motivations and strategies to the table, offering a wide range of options to sellers. As the market continues to evolve, understanding the different buyer profiles is essential for navigating the complexities of M&A in the printing sector.

Print consolidation is not a new phenomenon and has been prevalent for many years, driven by several converging microeconomic and macroeconomic conditions dating back to the Great Recession and before. First, the printing industry remains one of the most fragmented in the United States. Fragmented industries inevitably consolidate due to cost saving opportunities, the ability to eliminate redundancies, and synergies that become available as two companies combine into one.

Second, the economy has proven resilient and strong in recent years, with banks lending for M&A transactions and interest rates remaining low (at least until late 2022/early 2023). These favorable economic conditions attracted many financial buyers. Their mantra is that once they show up at the wedding and say, “I do,” there is no turning back. They then proceed full steam ahead to gain critical mass through additional bolt-on acquisitions. Until we officially enter a recession or interest rates become untenable, these buyers will continue to seek growth through acquisitions, as this type of growth is often easier to achieve than organic growth in somewhat mature industries like printing.

Third, and perhaps most significantly, is that the segregation of our industry into one of “Haves” and “Have Nots” is well under way and more divisive than ever. The Haves have invested heavily to transition their print businesses into full-service communication firms, resulting in “sticky” customer relationships in which price is often not the most important factor. Examples of these investments include digital and inkjet technology; customized storefronts and portals; 1:1 capabilities; ROI and data analytics; creative; and complex kit-packing and fulfillment. The Have Nots have been reluctant to make these investments and remain almost solely focused on traditional offset; as a result, they remain in the price commodity business where a print buyer will go elsewhere for what seems to be savings of only 10 cents. The investments have been costly, and the learning curve steep; however, the efforts are bearing fruit and, today, the Haves are thriving. Conversely, the Have Nots are merely surviving and feel vulnerable. They are struggling and, more and more, looking to sell to a Have. This is exciting to buyers of printing companies because once they own a Have, they can acquire a Have Not at an attractive valuation and immediately offer new cross-selling opportunities to the customer base.

When it comes to selling your business, understanding the different types of buyers is crucial. Each type of buyer brings unique perspectives and strategies to the table. In the printing industry, buyers can be broadly categorized as either strategic or financial:

Strategic buyers include consolidators, competitors, and management teams executing a management buyout (MBO). Consolidators look to combine multiple companies to achieve economies of scale, reduce costs, and enhance market share. Competitors often acquire other printers to expand their market presence and/or footprint for distribution purposes, or diversify their product and/or service offerings. MBOs involve the company’s existing management team acquiring the business, ensuring continuity and leveraging their insider knowledge of the business for growth.

On the other hand, financial buyers encompass private equity (PE) firms, family offices, and search funds. PE firms seek to invest in platform companies with high growth potential, aiming for significant returns through bolt-on acquisitions and strategic improvements — always with an eye on their eventual exit. A typical PE buyer will joke that congratulations should be reserved for the day they sell the business, not when they buy it. Family offices, managing the wealth of high-net-worth families, have fewer investors to answer to and enjoy more time-horizon flexibility. They seek to invest in stable, cashflow-generating businesses for long-term growth and returns. Search funds are created by investors and/or entrepreneurs who raise capital to acquire and manage a company, typically focusing on smaller, under-the-radar businesses with potential for substantial long-term value creation. Each type of buyer brings unique perspectives and strategies, contributing to today’s dynamic M&A landscape in the printing sector.

Click to enlarge.

When it comes to selling a business, understanding the different types of buyers is crucial. We always strive for our clients to meet with both strategic and financial buyers to appreciate the differences and help them determine firsthand which type best meets their objectives. Our experience has been that sellers often initially believe their business will align best with one type of buyer. However, after meeting both types and gaining a deeper understanding of their differing strategies, they often end up favoring the other.

The chart below explores the key differences and similarities among financial and strategic buyers’ objectives.

Click to enlarge.

As a potential seller, you need to do your homework to develop a thorough understanding of your objectives for your business and assess the potential pros and cons of each type of buyer. That will help you fine-tune your vision for the business so that it aligns with that of the buyer. By carefully considering these factors, business owners can make informed choices aimed at maximizing value and setting the stage for future success. Identifying which type of buyer best fits your objectives is critical, but it is equally important to find a buyer whose culture aligns with your business.

The M&A landscape in the printing industry is more relevant than ever before. With a mix of strategic and financial buyers actively seeking opportunities, the industry is poised for continued consolidation. Understanding the motivations and strategies of these different buyer types is essential for anyone considering an exit strategy. Whether you’re a potential seller or simply interested in the industry’s future, staying informed about these trends will be crucial. As we move forward, the ongoing transformation of the printing sector will present both challenges and opportunities. The Haves will continue to differentiate themselves, generate organic growth and make themselves “sticky” to their customers. The Have Nots will feel more vulnerable, ensuring the continued relevance of consolidation opportunity within the industry.