M&A: Opportunity or Pitfall: I

By Andrew Paparozzi
In October 15, 2012

n our last post “Industry Recovery: On Again, Off Again,” we mentioned that commercial printing industry sales have shown very little net movement since bottoming two years ago. Nonetheless, there are companies that are growing and some are growing sharply. The wide gap in individual company performances can largely be linked to company initiatives and execution. In the current environment, companies have to create their own recovery—they need to take advantage of the opportunities available to them. For some, avenues of opportunity are opened and developed through mergers and acquisitions (M&A). When asked how they intended to make 2012 better than 2011, almost one-third (30.3%) of NAPL State of the Industry participants indicated they intended to grow through merger and acquisition. However, as we’ve frequently commented on the evolution of our industry, there are no one-size-fits-all answers, and there are no panaceas. Companies must be well aware of the potential pitfalls, as well as the potential benefits. They need to know what’s involved and what they’re getting into. In other words: They need to do their homework.

As is true with other issues, when exploring the pluses and minuses of M&A, what better source than your peers. What have they experienced? What lessons have they learned? This is exactly what we did through the NAPL Mergers and Acquisitions Survey: Summer 2012. Among some of the general findings:

• When asked what were their goals for M&A, three-quarters (74.7%) cited “expand our business and client base.” Other widely cited goals include: fill excess capacity on existing equipment (57.8%); add new products/services, expand capabilities (56.6%); diversify our client base (51.8%); and consolidate overhead and other expenses (43.4%).

• Companies’ experiences with M&A varied widely. For a majority, M&A either didn’t meet all expectations (56.5%), or was unsuccessful—fell far short of expectations (6.5%). However, for others, M&A exceeded (9.7%) or fully met expectations (27.4%).

• The reasons some companies haven’t pursued M&A: we’ve done well on our own (81.0%); don’t know the best way to get started (33.3%); concerned about losing control of company (19.0%); and believe M&A is too expensive (14.3%).

Here are two points veterans of multiple M&A transactions emphasized:

• By preparing thoroughly and working closely with legal and financial experts we can reduce the risk of a transaction but never eliminate it.

• No matter how many transactions we’ve completed, no matter how much we think we know, we learn something every time—or, we better learn something every time.

We’ll discuss some of the survey participants’ valuable insights regarding mergers and acquisitions in future posts, and the results of our research on M&A will be thoroughly presented in an upcoming NAPL White Paper.

Andy Paparozzi                      Joe Vincenzino

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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