M&A trend looks set to continue in ‘17

By Richard Stuart-Turner, Monday 09 January 2017

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Although the UK print industry has always experienced its fair share of M&A activity, the past few months have been particularly busy in that regard.

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Recent trends have seen the most movement in this area happening in the packaging sector, though there has also been plenty of action in the marcomms area.

Deals completed in the past four months alone include Integrity Print’s acquisition of Alliance Labels, Multi Packaging Solutions’ purchase of AJS Labels, Smurfit Kappa’s acquisition of Saxon Packaging and Kingsdown’s Burleigh Portishead buy, though this list is barely scratching the surface.

Graham Knight, managing director of Crawley, West Sussex-based digital and wide-format printer Xpress Group, which completed its acquisition of creative agency Calico two months ago, says he saw the deal as a relatively quick way of growing his business.

“It’s not an easy route but it’s quicker than a conventional route of going out and just trying to sell more. 

“We would definitely look at acquiring more marcomms businesses, it seems to be a growing area and it fits quite nicely as an add-on for us. It also doesn’t involve an awful lot of equipment or take up a lot of space.”

Richmond Capital Partners chief executive Paul Holohan says the marcomms area has become an increasingly attractive target for acquisitive print firms due to becoming a significant part of the marketing mix in recent times.

“In the marcomms arena it’s often about buying services that you don’t have, particularly in data analytics, which has particular skills. It’s not easy to develop those skills yourself so buying a business like that is a really good entry-level way into marketing communications.”

Packaging and labels businesses, meanwhile, are popular acquisition targets due in part to the fragmentation that exists in these sectors. 

“There are still around 3,000 to 4,000 firms producing packaging in various areas, and it’s growing. The internet has developed a lot of business for packaging companies,” says Holohan.

“Labelling is another area of real importance because consumers want information about products and there are a lot of regulations, so I don’t see that going away.”

Nicholas Mockett, head of packaging M&A at Moorgate Capital, says packaging is also recognised as being a resilient industry.

“Even if the world plunges into a recession you tend to see packaging performing very well, which is not true of other industries. People who have a strong position in packaging are generally seeking to grow it because it looks like a good place to deploy capital.

“It’s ripe for consolidation in the sense that most parts of the packaging industry are still relatively fragmented and typically more fragmented than their supplier base and customer base. 

“If you’re being squeezed by your suppliers and customers then one thing you can do is become a bit bigger so you can punch back a bit harder.”

Glasgow-headquartered packaging firm Macfarlane Group acquired three companies last year; Colton Packaging Teesside, Nelsons for Cartons & Packaging and the packaging arm of Edward McNeil.

“There’s an opportunity to take a bunch of these companies and bring them together in consolidation to get the benefits of the economies of scale,” says Macfarlane Group chief executive Peter Atkinson.

Also experiencing healthy levels of recent M&A activity is large-format, with areas such as signage and textiles continuing to show strong growth.

“Large-format is also an area where you can bring in more creative data-led solutions. There are some companies who have gone into retail planning and shop fitting or even moved more into plotting consumer buyer behaviour,” says Marcus Clifford, regional director for the eastern region of the BPIF.

Holohan says there are a number of possible drivers for any M&A deal. “It’s a bit of a mixed bag in terms of what people want from it but typically includes access to skills or access to a better geographical market. Management is always a scarce resource so a good second tier management team is a real asset too.”

Atkinson adds: “There are also a lot of private businesses with owners coming to the stage in their life where they’re looking to retire but haven’t got people to pass their business on to.”

Market analysts are expecting the current flurry of M&A activity to continue into 2017, particularly among larger businesses, as per the general trend over the past few months.

“People are going to continue to want to differentiate their business models and broaden out their revenue streams,” says Clifford.

“There’s an aspiration in smaller companies to do that but it’s the mid to large-sized companies who have got the ability to pay the fees and costs and make those acquisitions.”

Mockett adds UK outbound M&A activity has risen significantly across all industries since the UK voted to leave the EU.

“In my view that’s been driven by people in the UK wanting to diversify their position and have a foot in another camp.”

Though he acknowledges that some companies have been holding back for the time being.

“With things like the Brexit vote and the American situation, I think some people are waiting to see what happens before signing on the dotted line.

“But when that turmoil is behind us it will either be business as usual or there will be a new kind of ‘usual’, in which case they will need to get used to it and crack on and do some deals.” 

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