Marriages of convenience: mergers and acquisitions in print
Monday, May 16, 2016
There is a scene in the film version of Bret Easton Ellis’ gothic horror American Psycho where deranged executioner Patrick Bateman (played by Christian Bale) spouts to a club patron: “I’m into murders and executions mostly.” The patron mishears and her response is: “Do you like it? Most guys I know who are in mergers and acquisitions really don’t like it.”
Company mergers for SMEs are not always seen as the holy grail of good management. But in this wobbly post-recession era, maybe print companies pooling their resources and combining is the way forward?
This was the case for Surrey-based sports signage company SignAway. In April, SignAway officially merged with two Danish companies, LogoPaint and 5m Print, to form Amayse, which its managing director Greg Craigen now believes to be one of the biggest branding and signage companies in Europe. So just how did this come about?
Craigen says: “I think that you know pretty early on in discussions whether or not you can work with someone. I think it was really important for me to understand and know that moving forward we would have a good working relationship. For me that was more important than anything else.”
Conversations about the merger only took place for about a month before each company signed on the dotted line last July, with provisions put in place for an April 2016 launch. Coming up with a name that would appeal to UK, US and Scandinavian potential clients was the trickiest part.
Craigen also thinks the decision to merge with a company outside the UK, but within the EU, was a smart move. It was a factor for him, as red tape could put some companies off. He says: “In Denmark, the law is more geared towards moving things quickly and easily without bureaucracy, so the hoops we had to jump through in Denmark were quite easy.”
Amayse now has 40 staff, and has cleverly pooled its resources to avoid outsourcing for big jobs. Clients in the sporting world include the Rugby Football Union, the Football Association and sponsors such as Aviva and Sky Bet.
Sometimes, ‘strategic acquisitions’, such as when one business buys another but keeps its identity intact, retaining staff, branding and premises, are seen as a viable option. After pondering the decision for about 18 months, last December, plastic card manufacturer Company Cards “strategically acquired” digital and wide-format printer Finishing Touch. The two have since formed a strong partnership.
Finishing Touch has bought two new Konica Minolta digital presses, a Horizon Perfect Binder, and shipped its offices to Company Cards’ premises in St Helens, Merseyside. All of this with no staff reductions and no significant corporate restructure.
John Traverse, who was manager of the University of Cumbria printing facility before moving to Finishing Touch, is full of praise for the acquisition. “It brought new life to Finishing Touch. We decided to add a few things that weren’t already in existence and also take advantage of Company Cards’ expertise,” he says.
“It’s only just beginning to blossom really, there is more work coming through and different types of work coming through. We are becoming heavily into promoting the business and also promoting Finishing Touch through Company Cards.”
So it works from a marketing perspective as well. Even though the two companies in this case remain separate entities, at least in name, they are able to promote each other’s products and feed off each other’s expertise.
Jon Bailey, chief executive of marketing services printer ProCo, believes the key to success is in the culture of the acquisition. Having purchased a 50% stake in Concept Communications Group in October 2014, ProCo followed through with the full purchase this month, a move he says was driven by the people at Concept just as much as by those at ProCo. He speaks richly of the immediate synergy and connection between the two companies and between him and Concept managing director, now ProCo managing director, Giles Bowes.
“One of the biggest initial frustrations is trying to bring two businesses together and dealing with the ‘them’ and ‘us’ comments,” Bailey says. “If there are production issues or challenges then automatically people go into their own and believe it to be an issue with the other side but I think the key to sorting this out is to have clarity at the top.”
Acquiring the Essex-based firm has tapped Sheffield-based ProCo into the South and given it access to marketing services it previously didn’t have. It now has combined turnover of more than £20m with a combined staff number of 120.
For certain SMEs, the prospect of a merger has never quite been tempting enough however. Managing director of Hampshire-based Bishops Printers Gareth Roberts believes too many companies want to merge simply for the wrong reasons.
He says: “During my time here at Bishops we’ve only ever grown organically and I’ve really struggled to get into conversations with other business owners where I can see a benefit for both parties.”
“Too often, in my experience, the vendor has unrealistic demands based on what they want to earn in retirement rather than what the business is worth. Either that or the business has become so weak and behind in its investment requirements that it needs to be ‘put down’.”
The prospect of a merger or acquisition for a growing or even a struggling SME can often be attractive, but a marriage of mutual convenience isn’t always just around the corner. It takes patience, strategy, “synergy” and sometimes just a little bit of luck along the way.
Mistakes happen. Ignore the golden rules at your peril
Paul Holohan, chief executive, Richmond Capital Partners
There is definitely a growing trend driven by a few factors. One is impending retirement. People who may have been 60 in 2008 are now 68 and maybe, after the crash in particular, they sensibly held back from selling. Often sons and daughters don’t want to do what mum and dad have done, so business owners are looking to merge or acquire.
Then there is growth. The firms who are committed need to grow. You can’t build a business unless you grow so mergers and acquisitions became an option. In real terms, 1% or 2% growth isn’t really growth at all. In reality you’re not standing still, you’re either going backwards or forwards. For the firms looking to stay in touch they are very much in pursuit of growth; sensible growth in a sense.
I would say strategic acquisitions are a growing trend as well. Too much change too soon when you have made an acquisition isn’t good. Keeping the brand is good for business. Too many think it’s way too easy to just move a business or change its name. These are quite important things to think about.
Mistakes are sometimes made. There are some golden rules in any process and you ignore them at your peril. There is almost a list of things you must do and a list of things you must not do. You must take professional advice and I don’t mean just from an accountant, you need someone with good experience if you want to avoid the pitfalls.
What I would say is I do think it’s such a big decision doing an acquisition that I think you really do have to make sure that you dot all the ‘i’s and cross all the ‘t’s. It may seem simpler or easier to cut corners but nothing good ever comes easy. Cutting corners and cutting red tape is not necessarily a good idea.
If SME M&As are on the up, how should you go about them?
Jacky Sidebottom-Every, sales director, Glossop Cartons
“I don’t think it’s a growing trend, I would say to be honest that mergers and acquisitions have always been an ongoing movement in our industry. I think as companies grow bigger and stronger they do have their eyes on acquisitions. When approaching these deals, I think you’ve got to do your homework and be very clear with yourself as to what you want. Over the years we’ve seen people merge with or acquire companies that simply haven’t been a good fit. Homework and expectations are definitely the most important thing.”
James Cuthbert, managing director, Elle Media Group
“There is a growing trend for mergers and acquisitions, brought about by a combination of diminishing volumes and new technology. Despite failures over the past 10 years, there is still too much capacity within the sector. New technology has changed the face of printing and those that have embraced this change have reduced unit cost significantly, but still need to grow their output to feed the hungry equipment. Mergers and acquisitions are an attractive solution, however they are neither quick nor easy to achieve.”
Martin Ruda, chief executive, Tall Group
“I think generally the trade is under pressure from alternative media and the pressures on margins as the world becomes ever more competitive, as we’ve seen with a number of high-profile failures. The concept of one or two competitors getting together to create a bigger competitor is often a valid strategy. It clearly brings together incremental revenue and potentially margin and removes a competitor at the same time. Consolidation in niche sectors is a typical driver for a merger and acquisition and I think we will probably see that continuing.”