Hitting the right notes in business
Wednesday, October 3, 2007
From a standing start, Mike Dolans Media & Print Investments (MPI) has built a group with sales in excess of 55m in less than 18 months. With a background in the music industry, launching several record labels and managing acts such as Robert Plant, Led Zeppelin, Eurythmics, Judas Priest, Eddie Grant and, erm, Bucks Fizz, its fair to say that Dolans drive to become a major player in print inspires many questions. In his first interview, we try to get the answers to some of those questions.
I was looking for a good business opportunity where there was the potential to not just advise and provide finance, but to get actively involved in building a business. I came into it through a curious route really; my wife is a painter and she exhibits at a London gallery and I met Ben Crozier (now head of operations at MPI) there. At that time, he had recently bought fine art specialist BAS Printers and we were talking about the quality of the [art] catalogues and I was intrigued about the tangible, tactile side of a business where you actually make something so unarguably attractive, so we developed a relationship from that.
Has it been a steep learning curve, or are there similarities with your other businesses?
I suppose management was the common thread. The man management and the need to motivate people are the same in any business. Whether you’re managing a rock band or a print factory, people still have the human foibles of what they will do, won’t do, choose to do, prefer to do – the politics of life really.
Much is said about the falling margins and overcapacity across the sector, what made you think it was an industry you could make money in?
You can see in certain companies a malaise, people saying ‘we’re stuck in this trap’ and that was very demoralising when I was looking at firms in the early days, because I thought maybe they’re right. But, the optimistic side of me thought, maybe they’re wrong and just mired under the weight of trading pressures that mean they can’t see the wood for the trees.
Clearly no one is going to put you off continuing in print then, but having already created a business with sales of around £55m, what is your ultimate goal?
There’s no cap on the ambition of MPI, but at the same time, we’re not here to acquire anything willy nilly. There is a strategic focus to what we’re doing, which has become more apparent with each acquisition. What we’ve got now is very clearly defined areas of the business: colour book printing with Butler & Tanner, magazine printing with Friary Press, fine art with BAS and Borcombe SP covers quality commercial work, so we now have four defined yet overlapping areas and there’s enormous potential in each of those for expansion.
Are you looking to add new sectors too?
We’re not interested in web and, by extension, we’re not interested in gravure. We’re not trying to be all things to all people, we’re just trying to be all things to a select clientèle. So there are some other areas – primarily related to retail – where there would be great synergies between our current companies.
I guess we’re talking about the large-format and PoS sector?
Well, yes. It’s a natural arena for us to be in. It’s a little like when somebody asked me why I thought print managers had become so dominant and the answer as best I know is that it was because printers weren’t providing what their customers needed, they were offering what they produced, which is two different things. So there was an opportunity for an intermediary to come in who knew where to source the complete package.
Getting back to MPI’s future, surely such frenetic growth must come at a risk?
We’ve got to consolidate what we’ve got, no question, but it’s more a question of opportunities that arise or that we can find that will determine the pace of future acquisitions. We’ve consciously set out not to have the typical private equity or venture capital model of saying we want to achieve £100m or £200m sales by X time and we want to be out in three to five years. We want to build a good business for the long run. Our ambition isn’t limited, but it’s not artificially targeted either because there’s a danger that when you do that you’re not filtering out the bad transactions. Of course, if the right opportunities come along and we can get up to £100m in the next year or so, I’ll be very happy, but I won’t do it for the sake of it.
Long-term goals: can you talk about an exit strategy or timescale?
There’s absolutely not an exit strategy. The idea is to build value for the investors. At its simplest, if we sold the business, what we would get out is money, and so then you’ve got to use that money to buy something else otherwise it just sits t there and rots. So the money has got to build a business and yield. Provided we can build the business and manage it so that it provides a good yield for the shareholders, we don’t need to sell. I certainly envisage being here for a long time yet. Our sole strategy is growth.
So are there any acquisitions on the cards right now?
Frankly, we’re ready to make another acquisition today; the key constraint to that is management. We’ve got great management across our operations, but we don’t have spare executives that we can parachute into new acquisitions – we have one or two. Ben Crozier would be the key person that would need to be in from day one at any acquisition, but right now, he is heavily involved with B&T. That’s not to say that if we found a potential acquisition with strong management that thought the same way we did, we couldn’t integrate it
easily. The only limiter right now is finding businesses that are the right fit with the right people, so that we don’t have to overstretch our
own management resources.
If money’s clearly not the issue, you obviously have substantial backing, where is it from – who are they?
They’re all private investors, primarily people who invested in my previous music businesses. One of the largest single investors is based in Kuwait, and there are some in the US, but we’re around 70% owned by UK investors. The important thing is that all the backers are private rather than institutional, which enables our entrepreneurial approach.
From what I’ve seen, your strategy of buying a combination of going concerns and then also order books and client lists to roll in to them is interesting. It seems odd more people aren’t doing it.
I agree. I don’t think we’ve reinvented the wheel [by buying order books and customer lists]; I think we’ve just perhaps brought to print what other industries have been doing for quite some time. There is an imponderable when you do a deal like that. For instance, when we bought Garden House Press (West), it had a bad reputation from the Pims days and the trade perception was that it had very fine margins and not a lot of trade. A lot of that was true, but in actual fact, James Elliot had actually done a pretty good job and there was £3m-£4m worth of sales that had pretty good margins.
So is there a typical modus operandi when buying firms? What do you look for?
We’ve looked at a lot of companies [over 55 in total] and there’s no simple formula. The three key things for us are the client roster, embedded value and the management. That’s how we value them, but we focus on prospective value not historical value. If you get all three balancing out, which was the case with Borcombe and Friary, then it makes sense to buy those firms on a going concern basis. We would have bought Butler & Tanner (B&T) without it going in administration if we could have. It was a solid business that was hamstrung from going forward because its balance sheet was shot to ribbons by its antecedence, where they hadn’t spotted the change in the market seven or eight years ago.
B&T was your biggest and latest acquisition, and perhaps the most problematic – the colour book market is really struggling, why did it appeal?
B&T is the largest colour book printer in the UK now and we actually see that as a growth area. I feel that the carbon footprint of books is going to increasingly become a big issue, which will hit UK books printed in Eastern Europe and the Far East. At their old peak, around eight years ago, B&T had £43m in sales and that was all in colour book printing. In there worst year in 2006, they did £30m, of which only £11m was colour books. While it’s horrendous that its colour book market had fallen to a quarter of its previous level, the other statistic that I look at is that they actually put on £19m of sales in new markets in that period, and that’s an impressive figure.
What’s been the reaction to the purchase. Has there been any fallout from buying it in a pre-pack?
Well there hasn’t been one single job loss at B&T and we’ve got 100% support from all of our key suppliers, so there’s been no negative response at all. If it was what is euphemistically called a ‘phoenix’, that would have been different, but this could never have been described as a phoenix. Everybody who was close to the deal, the banks, the unions, the pension fund the key trading partners, all know that and all know that we had every intention of making the purchase on a solvent basis. The only reason it was in administration for 15 minutes was because of the constraints on the former directors from the pension regulator.
Getting ex-B&T managing director Adrian Huett back (as MPI’s director of strategic sales development) nine months after he left B&T was an interesting move. What are your plans for him and will there be any problem with him working with his ex-chairman at B&T Andrew Hillman (now MPI deputy chairman)?
As I mentioned earlier, the decline in the colour book market wasn’t of B&T’s making. Yes they should have spotted it and done something about it earlier, but when they did react, they actually did a pretty good job. So whoever was responsible for driving that £19m worth of sales should be in our team, and that was Adrian. And there is no bad blood at all between Adrian and Andrew.
Speaking as someone with a fresh pair of eyes on the print sector, what have been your observations?
There’s a paucity of seriously good managers in print. They may be excellent printers, but many don’t see the bigger picture. They don’t have the strategic vision to see where their businesses are going. When I say that, I’m talking about the smaller companies, say up to the £20m sales range. Many tend to be terribly ‘micro’ and bemoan the fact the industry isn’t what it was as though they’re shackled to print, which they’re not. If they’re good managers in print, then there’s plenty of other opportunities for them. Equally, there are plenty of good opportunities inside print for management to be brought in from outside. It’s a mature industry, but from where I sit, it’s a very exciting one because there’s lots of opportunity to build a business. People still want printed materials, virtually everything you look at is printed. If I’m honest, I’m probably even more excited about the industry now than I was when we first got into it last year.
Final question. What with Led Zep getting back together for a tribute gig, do you wish you were still managing them or would you rather be in print?
If we’re talking about a one-day one-off, then I’d rather be managing Led Zeppelin, but I’m more than happy to settle for what I’ve got now!
CV MIKE DOLAN
1969 booking agent (acting for Pretty Things and Merseybeats)
1970 becomes artist manager, first signing Robert Plant
1979 sets up first record label
1988 sells artist management companies and record labels
1999 sells record publishing businesses
February 2006 buys £5.3m-turnover printer Borcombe SP
March 2006 buys bookbinder Richard Harsher
March 2006 buys £2.5m-turnover fine art printer BAS Printers and £2m-turnover Guilder Graphics
February 2007 buys principal assets of Garden House Press (West)
March 2007 buys principal assets of Romsey Group
August 2007 buys £30m-turnover Butler & Tanner