Friday, September 7, 2018

It’s Back to School Time - August 2018 M&A Activity


As the summer wraps up and our younger generation heads back to school, the printing and related industries are getting ready for their own education. Now begins the annual parade of executives, managers and our best and brightest employees, leaving behind the daily grind of the office and production floor to attend one or more dazzling events and marvel at and learn about the latest technology for putting ink on something. It’s trade show season, a good time to pause and take stock of the changes occurring in the industry.

As readers of The Target Report know, we view the industry from the perspective of transactional activity. Over the past seven years, we have reported on the robust merger and acquisition activity in the printing, packaging and related industries. In some segments, that actively tells us that opportunities are excellent and well-heeled buyers are seeking to put their capital to work and invest in growing markets. Conversely, significant transactional activity in other segments, especially when correlated with data on bankruptcy filings and plant closures, is a very good indicator that the collective market place is getting tougher and owners are deciding that it’s time to exit.

We went back to the data we have collected and reported to you over the past two years; we reviewed, categorized, sorted, counted and charted that data. One thing became abundantly and surprisingly clear – the trends are amazingly consistent year-over-year (albeit with a few exceptions) even to the extent that we logged exactly the same number of merger and acquisition transactions during the trailing twelve-month periods (“TTM”) ended August 31st in each of the past two years – 227 to be exact.




As we have often discussed in previous Target Reports, general commercial printing companies consistently rank high in the number of deals announced, followed closely by packaging companies (labels, folding cartons, flexible packaging and corrugated cartons). Activity in the wide format segment increased notably this past year – and when financial data was disclosed, several deals in the wide format segment sported multiples about two turns higher than their cousins in the offset commercial printing segment. In the publishing segment, activity was brisk and increased this past year compared to the prior year, mostly driven by deals in which community and regional newspapers changed hands.



When we looked at the seasonality of transactional activity, as shown in the chart above, the two past years differed notably in October, with a pronounced dip right before 2016 presidential election and a bump up in the same month the following year. June of this year was, for unexplained reasons, particularly quiet and tied for the lowest deal count in any one month since we began researching and writing The Target Report in 2011. Inexplicably, June of the prior year was the most active month we have recorded.

As noted earlier, transactional activity tells us that change is afoot, but is that activity indicative of positive or negative change? To try and answer that question, we track and look at both the number of bankruptcy filings and the number of non-bankruptcy plant closures.




Since very few companies in our industry survive a bankruptcy filing, especially the smaller companies, we can safely state that most of these companies ended up closing and the residual revenues flowed to a stronger competitor, either through a tuck-in transaction or via general marketplace assimilation. Many of the bankruptcies we noted were Chapter 7 filings, in which a trustee is appointed, and therefore we know that those companies were liquidated with no opportunity for survival. As we can see from the data, general commercial printing companies lead the pack with the most bankruptcy filings, year-over-year. We also note the negative implication for the publishing industry when we correlate the bankruptcy data with the number of M&A transactions. We have started to see some bankruptcy filings in the wide format segment (one of which this past year was of significant size), indicating that the “bloom may be off the rose” and the market for wide format printing services is getting more competitive. The spike in the materials manufacturing category was driven by both paper and ink companies filing. There were very few bankruptcies in the packaging industry segments, indicating that the robust M&A activity is a sign of positive momentum for packaging.

We also track activity in non-bankruptcy plant closures, in the chart below, which may or may not mean that the company is closing (the big consolidated printing companies, Quad and RRD, for example, close plants to rationalize production capacity, but the company goes on). Again, sadly, general commercial printing companies are far and away the leaders in closing printing facilities this way. As might be expected, several binderies, book printing and newspaper printing companies closed up shop.




We also took a look at the seasonality of bankruptcies and non-bankruptcy closures. As we can see in the chart below, printing companies overwhelmingly file bankruptcy right after the New Year and at the start of the summer season, both times when collectible receivables are likely to be higher after the typically busier seasons for printing companies, and before the winter or summer doldrums bleed cash from a struggling company.



And lastly, below is the picture of how non-bankruptcy plant closures occur on a seasonally-tracked basis. Interestingly, a different pattern emerges in these closures, as compared to bankruptcies, with clear peaks occurring right in the middle of the times when most printers are busiest. A good assumption might be that these companies were hopeful that the busy season would produce sufficient cash flow to save the day, but the work was not enough to fill their coffers and they simply ran out of gas



See you at the shows!

Mark Hahn, the author of The Target Report, will be speaking about M&A in the printing and related industries at noon on September 30th at the Print 18 trade show in Chicago. Mark will be available to meet privately by appointment from Sunday afternoon to Wednesday at the McCormick Place convention center. Email mark@graphicartsadvisors.com

2018 August - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries  

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
Universal Mailing Services No Data Piscataway, NJ Prompt Direct No Data Staten Island, NY 8/29/18 No Data Acquisition
(Graphic Arts Advisors)
Mailing services Link
Alcom Printing Group No Data Harleysville, PA Great Atlantic Graphics No Data Lansdale, PA 8/28/18 No Data 363 Sale in Ch. 11 Commercial printing Link
AWT Labels & Packaging
(Port co. mason Wells)
No Data Minneapolis, MN  Citation Clinical Labeling Systems No Data Hauppauge, NY 8/20/18 No Data Acquisition Clinical trial labels Link
Deluxe $1,970 Shoreview, MN Remittance processing
(Div. First Data Corporation)
No Data Atlanta, GA 8/16/18 No Data Acquisition Financial processing systems Link
Graphic Systems Services No Data Springboro, OH Independent Press Supply No Data West Babylon, NY 8/15/18 No Data Acquisition Press parts distributor Link
MailPix No Data Huntington Beach, CA PrintShopLab
(Div. Photobucket Corp.)
No Data Denver, CO 8/14/18 No Data Acquisition Photo books Link
Brookstone Printing No Data Menomonee Falls, WI Badger Press & Photographics No Data Kenosha, WI 8/14/18 No Data Acquisition
(New Direction)
Commercial printing Link
Labelink
(Port co. Parkview Capital)
No Data Montreal, QC Safety Seal Plastic No Data Guelph, ON 8/13/18 No Data Acquisition Label printing Link
Lindenmeyr Munroe
(Div. Central National Gottesman)
$5,500 Purchase, NY Olmsted-Kirk Paper No Data Dallas, TX 8/13/18 No Data Acquisition Paper distribution Link
The Sourcing Group $83.0 New York, NY Transform $7.0 Atlanta, GA 8/8/18 No Data Acquisition Print distributor Link
WestRock $16,110 Norcross, GA Schlüter Print Pharma Packaging No Data Schönebeck, Germany 8/8/18 No Data Acquisition Pharma inserts & packaging Link
Amcor $9,320 Victoria, Australia Bemis $4,100 Neenah, WI 8/6/18 $6,800 Stock merger Flexible packaging Link
Adams Publishing Group No Data Minneapolis, MN Boise Weekly No Data Boise, ID 8/2/18 No Data Acquisition Community newspaper Link
TriboroMassachusetts News Media No Data Attleboro, MA Sun Chronicle & Fox Reporter
(Prop. United Communications)
No Data Kenosha, WI 8/2/18 No Data
Acquisition
(Dirks, Van Essen)
Community newspapers Link
Volaris Group No Data Toronto, ON Aleyant No Data Wheaton, IL 8/2/18 No Data
Acquisition
(Tennant & Russell)
MIS system for printing Link
Toppan Leefung / Vintage
(Div. Toppan Printing)
No Data
($13,120)
New York, NY
(Tokyo, Japan)
Transaction & Compliance Div.
(Sub. Merrill Corporation)
No Data Saint Paul, MN 8/1/18 No Data Acquisition Financial reporting services Link
HP Inc. $57,030 Palo Alto, CA Apogee $224.9 Maidstone, UK 8/1/18 $494.6 Acquisition Managed print services Link


2018 August - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
No Chapter 11 Filings Found this Month --- --- --- --- --- --- --- --- ---
Chapter 7 Filings:
No Chapter 7 Filings Found this Month --- --- --- --- --- --- --- --- ---


2018 August - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
The Village Voice 8/31/18 No Data New York, NY None N/A 8/31/18 Alternative newspaper Link
Marco Book Co 11/7/18 No Data Lodi, NJ None N/A Aug-18 Bookbinding Link
USA Docufinish 9/13/18 No Data Yorkville, IL None N/A Aug-18 Label printing Link
Cricket Press 9/12/18 No Data Manchester-by-the-Sea,
MA
None N/A Aug-18 Commercial printing Link

Tuesday, August 7, 2018

If you Can’t Beat ’em, Join ’em - July 2018 M&A Activity

LSC Communications, easily the most active company on our deal log since LSC’s formation in 2016, announced an equity investment in MAZ Systems. The acquired company is a “content logistics” company that has created a cloud-based software system that delivers articles, video, images, and audio to a multitude of content-delivery platforms including Apple iOS, Android, Apple TV, Roku, Amazon Fire, Apple News, Twitter, Amazon Alexa, LinkedIn, Slack, Xbox, YouTube, Vimeo, and others. The software navigates the programming nuances required by each digital platform. The content creator (publisher, brand, media provider or organization) is freed up to do what it does best, create original content. As new platforms emerge, the MAZ folks program the new pathways and connections; customers are relieved of the cost and complexity of keeping up with all these digital channels. 

As a printer of many publications, a position that LSC reinforced in September 2017 with its acquisition of Publishers Press, LSC is certainly affected by the digital headwinds facing publishers. Those digital forces are driving down both paid circulation numbers and ad page counts. Those seemingly relentless dynamics directly equate to press runs of fewer pages and lower quantities. In an attempt to explain how it makes sense to help its clients deliver content electronically via the expanding multitude of digital channels, LSC’s new President of Business Development stated, “LSC will harness MAZ’s technology to complement and expand its legacy platform to expose clients to new distribution solutions that help streamline and accelerate their business strategies beyond print.”

I must admit that I’m tempted to be enthusiastic when I see a printing company invest in ancillary services that create “value-added” around the core deliverable printed product. Examples of these acquisitions abound in our industry. Commercial printers acquire mailing services firms; high-volume printers build out sophisticated commingling operations and acquire logistics companies to drive down postal and delivery costs for their clients; commercial printers swim upstream into creative offerings; transactional printers establish highly secure facilities and compliance procedures to maintain data integrity; direct mail printers seek to establish closed-loop data analytics to prove and improve the effectiveness of their clients’ direct mail campaigns; offset printers acquire a wide-format shop – you get the point. Printing companies are using acquisitions to redefine their place in the market by expanding into adjacent services.

Some commercial printing companies have successfully navigated the transformation to become true Marketing Service Providers. Otherwise known as “MSPs,” these companies provide a full range of competencies, including ideation, creative and graphic design, website development and maintenance, campaign management, social media marketing, and yes, there is even print in the mix! In many cases, the printed messages are still a core component of the marketing campaign and often remain the primary revenue driver for the company.

Back in 2013, Brown Printing acquired Nellymoser, an innovator in mobile and print-to-digital campaigns that served the same advertisers that placed ads in the magazines printed by Brown (see The Target Report - Is the Printing Industry Devolving or Evolving? – March 2013). At the time, there was lots of excitement around the ideas of QR codes, augmented reality (“AR”) and NFC (near-field communication). All these technologies were designed to connect a printed page to a webpage on a digital device, usually a smart phone. By helping publishers use print to drive webpage traffic, or so the theory went, Brown (and other printers) were adding value to the print proposition that was their core competency and deliverable. Despite the apparent game-changing acquisition of a leading-edge mobile technology company, a year and month later, Brown Printing was acquired by Quad/Graphics at what appeared to be a bargain-basement price (see The Target Report - A Tale of Two Cities, the Best of Multiples, the Worst of Multiples – April 2014).

As LSC invests in the new digital content technology, it has continued to rationalize and divest non-core print operations. In July, the company announced the sale of its European print operations to the UK-based Walstead Group, a private equity-backed printing roll-up with trailing revenues of approximately $796 million. The business transferred from LSC to Walstead represents printing revenues of about $250 million and a reduction in LSC’s projected EBITDA of approximately $12 million.

A year ago, LSC made an equity investment in Authors, a software company that uses artificial intelligence to analyze editorial content (see The Target Report - Transformation and Rebirth – July 2017). That investment, and the recently announced deal with MAZ Systems, are clearly aimed at acquiring the next wave of content-related digital technology to serve the company’s publishing customers. The question remains; does the acquisition of software that automates editorial functions and enables efficient content distribution via digital channels support and drive core print operations? Or does the onslaught of digital publishing technology continue to eat away at high-volume publication printers, despite their best efforts to acquire and implement these technologies?

Packaging - Labels

Fortis Solutions Group, a serial acquirer in the label segment, announced its latest deal, the purchase of Lewis Label Products in Forth Worth, Texas. The acquired company manufactures pressure sensitive labels, shrink sleeves and flexible packaging. Backed by Main Post Partners since 2017, the company now has over 400 employees with locations in seven states.

Resource Label Group, a portfolio company of First Atlantic Capital and TPG Growth, acquired Ingenious Packaging in Toronto. Ingenious produces pressure sensitive labels and shrink sleeves for a wide variety of consumer products. Formerly part of Tapp Label, the Toronto operation was spun off and renamed “Ingenious” when G3 Enterprises, the investment arm of the third generation of Gallo winemaking family, acquired Tapp’s Oregon and California plants which mostly produced labels for the wine industry. This latest acquisition brings Resource Label Group’s locations to fifteen and is the company’s first in Canada.

Inovar Packaging Group, headquartered in Dallas, picked up Topp Labels in Miami and announced plans to tuck the acquired company into its existing location in Fort Lauderdale, Florida. Inovar was acquired by AEA Investors in January 2016 and later that year announced a triple-play acquisition of three label printing companies (see Private Equity LOVES Labels – August 2016). Inovar followed that deal shortly thereafter with the acquisition of LabelPrint America in Newburyport, Massachusetts.

Sun Solutions (formerly Sun Printing), a diversified commercial printing operation in West Columbia, South Carolina, acquired its first company in the packaging segment with the purchase of Graphic Label Solutions in Columbia, Tennessee. The company also owns Consolidated Mailing Services, a full service lettershop with commingling capacity
.

2018 July - Mergers and Acquisitions in the Printing, Packaging, Paper & Related Industries  

Deal Party #1
(Surviving Entity)
Pre-Deal
Revenues
($Mil )


Party #1 Address


Deal Party #2
Pre-Deal
Revenues
($Mil )


Party #2 Address
Date
Deal
Public
Deal
Value
($Mil)

Deal Structure
(Intermediary)


Notes

Press
Release
LSC Communications $3,710 Chicago, IL MAZ Systems No Data New York, NY 7/31/18 No Data Equity Investment Content logistics Link
Sun Solutions No Data West Columbia, SC Graphic Label Solutions No Data Columbia, TN 7/31/18 No Data Acquisition Label printing Link
Resource Label Group
(Port co. First Atlantic Capital)
No Data Memphis, TN Ingenious Packaging
(ne’ Tapp Label)
No Data Toronto, ON 7/31/18 No Data Acquisition Label & sleeve printing Link
Minuteman Press Longwood No Data Longwood, FL Metrovista No Data Longwood, FL 7/31/18 No Data Acquisition Marketing services Link
Mac Papers No Data Jacksonville, FL Wilkerson Packaging  No Data Atlanta, GA 7/30/18 No Data Acquisition Paper distribution Link
RFB Enterprises
(Reade Brower)
No Data Camden, ME Maine Titles (2) No Data Ellsworth, ME 7/25/18 No Data Acquisition Community newspapers Link
Inovar Packaging Group
(Port co. AEA Investors)
No Data Dallas, TX Topp Labels No Data Miami, FL 7/24/18 No Data Acquisition Labels & flexible packaging Link
Ahlstrom-Munksjö $2,609 Stockholm, Sweden Expera Specialty Solutions No Data Kaukauna, WI 7/23/18 $614.6 Acquisition Specialty papers Link
WhatTheyThink No Data Lexington, KY Printing News Group No Data Fort Pierce, FL 7/23/18 No Data Merger Industry publications Link
Walstead Group
(Port co. Rutland Partners)
$796.5 London, UK European print operations
(Div. LSC Communications)
$250.0
($3,710)
Chicago, IL 7/19/18 $60.0 Acquisition Web printing operations Link
Mudlick Mail
(Port co. Clearview Capital)
No Data Acworth, GA Muscle Up Marketing No Data Alpharetta, GA 7/19/18 No Data Acquisition Niche marketing services Link
Esko
(Sub. Danaher)
No Data Ghent, Belgium BLUE Software
(Port co. Diversis Capital)
No Data Chicago, IL 7/18/18 No Data Acquisition Brand management software Link
Ennis $369.0 Midlothian, TX  Wright Business Graphics $58.0 Portland, OR 7/17/18 No Data Acquisition Business forms & direct mail Link
Fortis Solutions Group
(Port co. Main Post Partners)
No Data Virginia Beach, VA Lewis Label Products No Data Fort Worth, TX 7/12/18 No Data Acquisition Labels & flexible packaging Link
Kelley Holmes No Data Fort Pierce, FL Printing News (and other titles)
(Prop. Endeavor Business Media)
No Data Nashville, TN 7/11/18 No Data Acquisition Industry publications Link
Fenway Group No Data Boston, MA Ambit Creative Group No Data Cambridge, MA 7/10/18 No Data
Acquisition
(Graphic Arts Advisors)
Commercial printing Link
Modern Litho No Data Jefferson City, MO James Printing No Data N Kansas City, MO 7/9/18 No Data Acquisition Commercial printing Link
Berwind No Data Philadelphia, PA Maxcess
(Port co. Bertram Capital)
No Data Oklahoma City, OK 7/3/18 No Data Acquisition Web rollers & accessories Link
Case Paper No Data Harrison, NY WinterBell Converting No Data High Point, NC 7/2/18 No Data Acquisition Paperboard converting Link


2018 July - Bankruptcy Filings in the Printing, Packaging, Paper & Related Industries



Filing Party

Date
Case
Filed
Pre-Petition
Revenues
($Mil )



Case #



Filing Party Address



Circuit



Region & City



Judge



Attorney for Debtor



Notes
Chapter 11 Filings:
Diverse Label Printing, LLC 7/23/18 No Data 18-10792 Burlington, NC 4th Middle NC
Greensboro
Catharine R. Aron John A. Northen  Label printing
Chapter 7 Filings:
Kernwood Forbes Press, Inc. 7/23/18 No Data 18-12805 Malden, MA 1st Massachusetts
Boston
Joan N. Feeney Jordan L. Shapiro  Commercial printing
Altman Printing Company, Inc. 7/12/18 No Data 18-03531 Spartanburg, SC 4th South Carolina
Columbia
Helen E. Burris Randy A. Skinner Commercial printing


2018 July - Non-Bankruptcy Closures in the Printing, Packaging, Paper & Related Industries



Closed Company / Facility

Date of Closure
Pre-Closure
Revenues
($Mil )



Closing Address
Related Party Related Party
Address
Date Closure Public


Notes

Press
Releases
Guynes Printing 8/29/19 No Data El Paso, TX Boutwell, Owens and Co Fitchburg, MA Jul-18 Commercial and packaging printing Link
Printing facility 8/22/18 No Data New Haven, CT Knights of Columbus New Haven, CT Jul-18 Publication printing Link
Business Printing 8/14/18 No Data Carrollton, TX None N/A Jul-18 Commercial printing Link