Potts Print (UK) has hit the M&A trail for the second time this year and added wide-format to its in-house product offering with a deal for a local print firm, part of an investment strategy fuelled by a focus on higher margin work.
The Cramlington, Northumberland-based commercial, packaging and DM printer has bought Digital XL Services, also based in Cramlington, for an undisclosed sum.
Prior to the deal, which completed last week (27 October), the £300,000-turnover firm had been a wide-format supplier to Potts for around six years.
“We don’t have in-house large-format and they had always done quite a lot of work for us and we had a very good relationship with them,” said Potts managing director Shaun Johnson.
“We had been looking at getting into wide-format, so it seemed a very logical step because it enables us to offer a lot more products to our customers,” he added.
The four-staff firm will stay at its current facility for the time being and become a division of Potts. However, Potts plans to more than double the headcount at the operation with four additional production staff and two business development managers, Geoff Armstrong and Frazer Varty, set to join XL after Christmas. Longer term, Potts may ultimately look to move the operation to its main production facility on Moorland Way.
Following the deal, XL’s founders, Keith McHugh and Iain McDougal will head up Potts’ new wide-format division and join the firm’s main board.
McHugh and McDougal described the deal as a “win-win” for themselves, staff and customers.
To support the purchase, Potts has earmarked a significant spend in wide-format kit once XL has fully bedded in, which could lead to it bringing all of its wide-format work in-house.
While Johnson said that the business wasn’t planning any further acquisitions in 2014, he hinted that it hadn’t ruled out further M&A activity in 2015.
“Never say never, especially knowing Michael [Sandford-Couch, Potts chief executive],” he said.
Earlier this year the £13.5m-turnover firm bought Bakershaw Print and to complement that and the XL deal Potts is set to undertake £3m re-equip in Q1 2015, which will include wide-format, sheetfed digital and litho kit.
The M&A and kit spending spree follows re-alignment of the Potts business, which involved exiting around £1.8m of lower margin work – a process that began around the tail end of 2013.
“We’re targeting to get back to £15m [turnover] next year and this year we look set for around £13.5m, but with record profits, which fully backs the strategy we took,” said Johnson.